November and December were not volatile months for bond markets.  While we sometimes associate the concept of volatility with losses in MBS (because volatility is bad for MBS), these two months were simply "bad months" for bond markets, but in a fairly linear manner.

Contrast that to the 4 or so months from mid-May to mid-September and it's a different story.  These were some of the most volatile and painful in modern memory.  Yet seemingly overnight, the push back against the past two months is being treated as a similar push back to those four months of agony.  Is that really possible?

Back then, when tapering was merely "possible" and the early 2014 Fiscal battle was a big unknown, isn't there inherently more to be bearish about (thus helping bonds) than the present day where the Fed just reiterated it's tapering intentions and where the Fiscal roadblock to further tapering is magically much less of an issue than most expected?  Or is the emerging market thing really that big of a deal?

Answers:

Yes, there was inherently more to be bearish about back then and no, the emerging market thing isn't a big enough deal to get the amount of credit it has so recently received (with that in mind, please be aware that it will continue to receive credit because it has come along at the right time in the right place to serve as a "hide-behind" for an epic positional reload for throngs of bond market participants eager to set up long term short positions at juicy low yields).

In other words, yes, it's a trap...  Probably.  If nothing much changes about the tenor of economic data, it's a trap and yields will return to their upward trajectory.  Emerging markets won't save us from that.  The only saving grace is the same as it ever has been: economic data would have to take a decided turn for the worse.

The last instance of NFP greased the skids for us to consider such things and that makes the next one rather important, and that's next week.  If something is going to get 10yr yields looking even more like they did back in October, it would be a similarly rotten NFP next Friday.  It's no coincidence that markets have seized on whatever they can to justify as big a move as possible between now and then.

That's not to say that the tradeflow shifts around the new Year, corporate issuance, and the emerging market drama isn't a big deal.  They're all relevant, but none of them sufficient to make bonds go so completely against the grain of what has been a much less volatile sell-off in the last 2 months of 2013. 

The dark horse possibility is the stock lever.  If investors are entertaining a stock market correction so intense that it comes close to what people on TV speak about, then it wouldn't make much sense for bond markets not to realize some additional benefit.  We'll cross that bridge when/if we come to it though.  For now it's about next week's NFP, and the intervening data either accelerating or dissuading recent bond market levity.

Today's contenders in that regard are the upper-middle tier Chicago PMI and middle-lower tier Consumer Sentiment reports at 9:45am and 9:55am respectively.  Keep in mind that a big miss/beat in Chi-PMI will move market 3 minutes before the data actually hits as paid ISM Chicago subscribers get the data early.