Bond markets have had a volatile morning so far.  Treasuries were slightly weaker overnight, resulting in lower opening levels in MBS.  Both were weaker still after the 8:30am economic data.  Although the Jobless Claims headline came in higher than expected, ongoing claims fell and the Durable Goods data was stronger than expected.

10yr yields crested 2.73 shortly thereafter and Fannie 4.0s moved down to 104-04.  They'd been at 2.685 and 104-11 late yesterday respectively.

Then came the mystery rally.  Bond markets reversed course and moved rapidly into stronger territory as stocks sold off just as abruptly.  The pace of the movement in European markets suggests the trading could be Ukraine-related and that's CLEARLY the route that media outlets have taken. 

Indeed geopolitical risk is an easy scapegoat for large, inexplicable, cross-market movements.  The only problem is that there is no specific headline or set of headlines that lines up with the market spike.  The news getting the most credit for the move was actually well-publicized 45 minutes earlier.

All we can definitively see is that market movement suggests some geopolitical concern driving trade, but it doesn't tell the whole story.  Perhaps the most telling clue in this mystery is that stocks and bonds have been very well connected on the way down and back up since roughly 9am.  In recent examples of KNOWN geopolitical risk trading, stocks haven't been as keen to keep pace with Treasury gyrations.  That suggests that there are organic motivations in the stock market and that bond markets are reacting to those as well, if not exclusively.

Whatever the true case may be (and we can be pretty confident it's not "all Ukraine!"), the rally stopped short of a strong move to break yesterday's range in bond markets.  Treasury yields and stocks put in their lows of the day simultaneously and 10s are now back into slightly negative territory while MBS are outperforming--holding modest gains of roughly 2/32nds in Fannie 3.5s and 4.0s.