• 10yr yields finally broke 1.80% ceiling, and moved quickly to break 1.84% after that
• Big gains in oil definitely played a part, but technicals and momentum were just as guilty
• Biggest day of losses in more than a month for Treasuries
• Biggest move higher in more than a month for Mortgage Rates

Moments after the noon hour, a snowball of bond selling began rolling, bringing prices down at the fastest pace in more than a month for both MBS and Treasuries.  

Sometimes, snowballs form serendipitously with a few bigger-than-normal trades in the same direction.  When that happens near a technical boundary, it can set off a chain reaction where one trade raises yields just enough for a few other traders to hit their stop-loss targets (the jargon term is "stopped out").  Those traders then sell, causing yields to rise enough to stop out the next few traders in line, thus perpetuating the cycle of selling.  The presence of the technical boundary just means there's a much bigger group of traders about to stopped out by the next bit of weakness.  From there, other classes of traders may sell opportunistically, simply because they see other traders getting stopped out and recognize that the momentum will likely continue.  

The presence of the technical boundary just means there's a much bigger group of traders about to stopped out by the next bit of weakness.  From there, other classes of traders may sell opportunistically, simply because they see other traders getting stopped out and recognize that the momentum will likely continue.  

This is a classic snowball, but it can also happen when traders are given a quick push by economic data, headlines, or other cues.  Looking around today's snowball for clues as to its origin, we definitely see some oily fingerprints.  Indeed, oil prices surged today, and we're well aware that's a net negative for bond markets, all things being equal. 

All things were not equal though.  The oil rally and bond market sell-off weren't perfectly connected.  In fact, if we consider the highs and lows in oil and bonds from yesterday through noon today, oil was already half-way done with its move higher while bond yields had scarcely started.  By 2pm, oil was essentially done with its move higher and 10yr yields would still rise another 4bps.

I would think of oil today as more of a negative backdrop for bond trading.  The more immediate issue heading into the noon hour was a reversal in European markets.  The DAX surged to its highest close of the year and German 10yr yields hit firm technical resistance at 0.14 before  bouncing back up to 0.17 by the close.  Now, that's scarcely on par with the move seen in US bond markets, but it was another source of determined trading momentum that came at a time when US bond markets were vulnerable.  

Another feather in the cap of the European thesis is the fact that tomorrow morning is an ECB Policy Announcement, including a press conference with Mario Draghi.  Historically, these can be some of the biggest market movers around--in the same league as NFP (back when it mattered) and FOMC Announcements.  There's some small chance that today's weakness was a pre-Draghi market head-fake, but the bigger risk is that we just broke out of the "golden era" range marked by 10yr yields of 1.84% and below.