Why Are Bonds Still Rallying?

Bonds improved significantly yesterday after the Treasury refunding announcement, economic data, and Fed press conference.  Most reports attribute the gains to the Fed either "holding rates steady," or "hinting at no further rate hikes."  This is debatable considering the Fed did much more than hint at such things in the 2 weeks leading up to the blackout period (via multiple speakers and Powell himself). 

Powell was also very clear to leave the door open for more hikes in the press conference.  That leaves us only a few ways to reconcile what has been an almost 30bp rally in 10yr yields over 24 hours. Among them is the notion that bonds were bracing for the worst news following the dot plot update in late September and reality is proving to be slightly better than that.  That's a more bullish view.  The bearish view is that this is just a deeper, position-driven correction that's at risk in the event of a strong jobs report tomorrow.

While the potential big-picture bounce at 5% has a lot going for it, caution is warranted until the prevailing uptrend is actually broken.