Strong Start Hit by ISM, But Shaking Off Weakness

Bonds rallied nicely in the overnight session and extended the gains in the first few hours of domestic trading.  The ISM Services data came in just a bit higher than expected with the employment component quite a bit higher.  Bonds gave up some of their overnight gains, but have been pushing back nicely as the day progresses. 

The rebound has been enough to get 10yr yields back under the 3.99% technical level (or 3.98% or 4.0% depending on your preference). Note the good show of support at the 4.08 technical level yesterday.  

Here's how the progress looks in 5.5 MBS: