• Bonds continue to defy critics with 10yr yields in the 1.7's into Q2
• We can't really say "it's stocks" anymore
• Oil is still part of the motivation, as is Central Bank policy
• Previous Feb/Mar uptrend in rates defeated.  Waiting for new trend to establish itself

Bond markets scored a major victory last week, and now it's time to find out if they can capitalize on it.  The victory in question is the defeat of the worrisome uptrend that began in mid-February after yields bounced at long term lows (1.66% closing yield and 1.53% intraday in 10yr Treasuries). 

But it wasn't until the beginning of March that rates began rising at their most disconcerting pace.  Stocks and oil prices were both along for the ride during that time, and markets became concerned that the waning global economic panic meant that the Fed might be in a better position to hike rates.  Instead, the Fed surprised markets on March 16th with a big cut in its rate hike outlook (via the economic projections, or "dots").  

From that point on, rates went no higher.  At first, the movement was sideways, generally following oil more than stocks.  Then when Yellen's speech last week confirmed the Fed is leaning more towards caution and accommodation, bonds continued into stronger territory.

This short term victory also had the effect of setting off positive signals in longer term technical studies.  We'd been tracking the uptrend that began in February and became more concerned about it as yields began moving higher more quickly in March.  The Fed announcement merely got that uptrend reined-in to some extent, but it wasn't enough to break the underlying streak of "higher lows" (in terms of closing yields--the white dotted line below).  

As the chart shows, the uptrend in rates was finally broken with Yellen's speech last week.  With yields spending the rest of the week trading under that line, we can consider the break of that trend to be confirmed.  It's still a bit early to begin tracking the next trend--largely because the current rally is fairly young.  If bonds can maintain the pace set last week, it wouldn't be long before we were challenging February's lows.

There aren't many economic reports this week worth writing home about.  ISM Non-Manufacturing on Tuesday is probably the highlight in terms of data.  Wednesday brings the only other highlight in the form of FOMC Minutes (a more detailed account of the March 16th meeting that helped bonds find their footing).  

After Yellen's speech last week, it's not readily apparent what more we could learn from the Minutes this week, but markets are always looking for more policy clues.  In this case, they may use the Minutes to confirm the consensus conveyed by Yellen last week.  If the minutes show a more balanced outlook among the other Fed members, that could be "it" for the bond rally.  To be fair, this isn't likely, given that we've heard from many of them, but it is a risk we're eager to rule out.