What a difference a day makes.  With the recent trading range being so narrow, it didn't take much for the overall tone in bond markets to move from the gloomy side of the range to the optimistic.  In this case, it was yesterday's ISM Non-Manufacturing data that served as the catalyst.

The underlying trade here (and the reason this data had as much of an impact as it did in the current environment) was all about Fed rate hike odds. Fed Funds Futures completely erased the past 2 weeks of their trading range. The Jackson Hole speeches took rate hike odds to their highest level since before June 3rd, and the likelihood of a Fed rate hike in December is now lower than it was before Jackson Hole.  Another way to look at the recent shift in Fed rate hike expectations is in 2yr yields (which are more sensitive to monetary policy than 10yr yields). Notice how they've been increasingly drifting higher (relative to their own recent trading range) than 10yr yields over the past few weeks and have more quickly snapped back.

The implication for longer term yields is positive, for now.  In fact, we're seeing signs of life in longer-term technicals for the first time in roughly 2 months!  ("Signs of life" in this context refers to the departure from "flatness" in the slow stochastic oscillator, a momentum measure.  When the lines are flat, there is no momentum.  When the green line is moving below the teal line, there is positive momentum).

Keep in mind that one of the endgame scenarios for this sort of breakout is a simple return to a horizontal trading range (as opposed to the consolidative, triangular trading range we're hoping to be breakout out of).  To that end, tomorrow's European Central Bank (ECB) announcement continues to be the highlight of the week.