Undoubtedly, yesterday's bond trading sent a clear message that a technical ceiling near 2.88% was met with strong defense from traders who bought bonds and pushed yields back down into the recent range.  Color all of us shocked, then, that today saw yields promptly rise right back up to that ceiling!

Perhaps even more frustrating was the fact that it would take no small miracle to make solid sense of the move from a technical or fundamental standpoint.  Still, I will try...

One of the two explanations I offered for yesterday's strong buying was that it could have been due to traders cashing out short positions.  More simply put, traders who bet on rising rates in the short term (at the last bounce at the bottom of the range  last week) could have booked their profits and closed out short bets once the range ceiling got taken out without witnessing a glut of follow-through selling.  

Notably, that move coincided with new "flattener" trades (betting on 10yr and 2yr yields getting closer together) because the spread between 10s and 2s looked like it was hitting a ceiling at the time the rally began.  Today then, could be most easily explained as a "pain trade" for that flattener.  Yes, Trump's comments in favor of low rates could have served as a catalyst at first, but from there, it is best viewed as a sort of short squeeze (but instead of being short on bonds in general, the squeeze was on those who were short the yield curve--i.e. betting on flattening).

By the end of the day, 10yr yields were back above the unpleasant ceiling that it looked like they'd defended yesterday.  MBS, however, are still inside their recent range, having only lost 7/32nds in price to the 16/32nds decline in 10yr Treasury prices (4.8bp increase in yields).