Bond markets (and markets in general) periodically experience an interesting phenomenon whereby traders are determined to make one of two bets following an anticipated piece of news.  This is most often seen in the reaction to the monthly NFP numbers.  Traders aren't always as determined to forcibly extract meaning from Fed communications, but when they are, the reactions tend to be more abrupt.

Today was such an occasion.  Janet Yellen could have taken her seat in the Senate and simply pointed discreetly toward the ceiling and the market response would have been the same.  Investors were ready to trade rates quickly to the low or high side of the recent range if they read Yellen's remarks as indicating lower or higher chances of a March rate hike respectively.

The first few newswires were all it took for the "higher chances" trade to shift into high gear.  Specifically, Yellen said a rate increase would likely be appropriate at one of the Fed's "upcoming meetings" and that waiting too long would not only be "unwise," but could also require "rapid, disruptive rate hikes that push the economy into recession."  

Markets reckoned that sounded like a Fed chief who stood a decent enough chance to lobby for a March rate hike.  If they don't hike in March, they'd most likely wait until June (because Mar/Jun/Sep/Dec Fed announcements have press conferences, which the Fed seems to prefer when making changes, even though they've said it doesn't matter).  And a June hike doesn't seem to fit with Yellen's comments.

Bonds sold off quickly and fairly sharply.  Later in the testimony, during Q&A, Yellen struck something of a dovish tone, pointing out that the Fed wasn't considering decreasing its MBS reinvestments any time soon and has no plans to sell MBS outright.  That was already the assumption among bond traders, but confirmation was reassuring.  It paved the way for a moderate correction in the afternoon, despite another record day for stocks.