It was not an auspicious start to the New Year for the Treasury market. The day started weaker as the "terror bid" diminished. But the big move came when the headline ISM number was 66.2 vs. 62.8, and vs. estimates for 61.5. Selling took over with a vengeance, with the 10-year yield popping six basis points in a blink.
Bids were not deep in eurodollars -- many players were unable to sell the size they wanted. With few end-user accounts involved, the move was mostly fast-money driven and by day's end traders began to worry about eventual convexity hedging. This, added to expected rate-locking, meant few positives for a fully staffed market on Monday.