Today's sell-off brought 10yr yields to their highest levels since the middle of 2014 (when they were on their way down following the taper tantrum.  With this, bonds have weakened substantially for each of the past 3 weeks.   That's where the small ray of hope comes in.  

Because the past 3 weeks of pain in bond markets are NOT acting as a correction to an overly-big rally, and because they're not occurring amid a large-scale adjustment of risk (like the taper tantrum or the presidential election) they're an incredibly rare sight.  In fact, apart from those aforementioned conditions, we really don't see more than 3 weeks of this much weakness strung together (once or twice every few years).  

Although today's afternoon weakness did little to change the overall damage this week, there's a ray of hope to be shone on that as well.  It looks entirely related to a glut of trading surrounding today's options expiration.  How do we know?  Simply put, things didn't get bad until AFTER the 3pm CME close. 

It's possible that options traders erred on the side of caution since they were not able to know the outcome of the government shutdown debate and closed positions that otherwise might have helped bonds remain in a flatter holding pattern (albeit at what would still be the weakest levels since 2014). 

It's also possible that they were going to close those positions anyway and that buyers just weren't as willing to step in as they might have been sans shutdown uncertainty and "worst since 2014" trading levels. 

Either way, the point is that the Friday options expiry amid the current conditions likely made this afternoon's weakness its own discrete thing.  It doesn't guarantee a bounce next week, but it means that today might not have been as bad on any other day.

2018-1-19 close