Bonds are coming off their roughest week in months with yields rising at their quickest pace since the mega-volatility seen during the panicked sell-off in March 2020.  Before that, we'd have to go back to October 2019 (the initial bounce from the trade war rally) to see anything comparably bad.  

Adding to the gravity of the situation is the fact that yields had been so sideways for the past 6 weeks.  The juxtaposition would seem to indicate that bonds were in a holding pattern while they deliberated over the timing and pace of an economic recovery with the big jump higher in rate marking a verdict.  

In other words, 10yr yields held so faithfully under the .74 and .79 ceilings that these became the dividing lines between the depths of the covid-19 economic impact and everything else.  Last week's rapid move up and over those ceilings corresponded with ultra-strong economic data (versus expectations) as if to say the darkest depths are behind us and now it's time for rates to move higher.  

To some small extent, these same concerns existed in early April when the growth rate of covid cases first began to level off, but the reality of the economic impact ushered yields into the sub 0.74% range (where they remained all the way until last week).  All that to say that the current bounce could also prove to be a false start, but the circumstances are definitely different than those seen in early April.

There is precious little economic data on tap this week.  If markets were hoping to add to last week's recovery narrative, they'll have to look elsewhere.  Instead, bonds will be focused on Wednesday's Fed announcement, where many market participants expect some sort of official QE announcement.  Last Friday was the first time since emergency bond buying was announced in March that the Fed kept it's daily buying limit unchanged in MBS ($4.5 bln per day).  That may give us an idea of what to expect if the Fed puts official QE in place on Wednesday.