In the past 48 hours, bonds have entered into one of those interesting rally patterns marked by a striking absence of conventional motivations.  That is to say, unless we consider these gains to be some sort of "follow-through" from last week's jobs report, there's no other economic data or news headline  clearly behind the move.  That forces us to move on to more speculative explanations.  The usual suspects at times like this include short-covering, technical triggers, and repositioning ahead of tomorrow's ECB announcement (and even next week's Fed announcement).  

While it's true we could lean on the notion of the economic data failing to reach "scary strong" levels, that would require wearing blinders around a few of the recent reports.  It probably makes more sense to focus on the blinders worn by the Fed whereby things like the most recent jobs report offer no objections to ongoing asset purchases and things like the 3%+ core inflation reading we're certain to see tomorrow can be overlooked as temporary.  Anticipation for a friendly announcement from the European Central Bank (tomorrow morning) doesn't hurt.

If we knew all this stuff, why didn't we rally more to start the week?  A fair question!  And there's no satisfying answer.  One of the best explanations is that traders were adding to short positions after the post-NFP rally (i.e. Friday's strong gains set up a selling opportunity in their eyes).  From there, it only took a small, incidental rally to push yields to levels that triggered short-covering and other relatively robotic trading seen when technical levels prompt an algorithmic snowball and a quick repositioning ahead of key events.  In plainer terms, too many traders were too sure that rates had no compelling reasons to move lower, and that sort of consensus is not sustainable in financial markets.

In addition to the relatively technical thoughts above, there are far more arcane forces potentially at work.  These are far beyond the scope of our typical discussions, and they're a bit speculative to boot, but for the 3 of you can wrap your minds around such things, there's been some talk that this yesterday's announcement of the SOFR transition is affecting big bank's reserve requirements in such a way that make it advantageous to buy Treasuries in the short term.  Yes, this is an oversimplification of the highest order, but we'll take what we can get on days without any obvious scapegoats.  

Last but not least, the rally momentum is notable ahead of the 10yr Treasury auction.  It's not the typical pattern.  This afternoon's auction results may fall farther than normal from averages.  Thus the resulting post-auction volatility could be bigger than normal (for better or worse).