Traders came back from the long Labor Day holiday weekend to find yields already headed higher on expectations that this week's heavy calendar of key figures would add to the increasingly optimistic growth scenario. Hence, the 2.9 point rise in the ISM manufacturing index did not immediately rile bears, and in fact elicited some short covering as the data did not match the strength of the Chicago PMI, and as the dip in the employment sub-index disappointed.
But the bounce in bonds didn't last long and yields again headed higher. Fears of convexity selling added to the pressure through the afternoon, as did rate locks on upcoming agency sales, a solid rally on Wall Street, and concerns about rising Treasury and corporate supply. The 2-year note and 30-year bond spread steepened another few basis points on the back-end's underperformance.