Bonds rallied today for the first time all week, and fairly well at that!  10yr yields fell more than 5bps and Fannie 3.5 MBS rose nearly 3/8ths of a point.  Not much to be mad about there, right?

Indeed, there's nothing to be mad about, but there are all sorts of reasons to remain cautious.  The rally was driven by a combination of European political drama and short-covering in US bond markets.  Here's an external link that does a better job than I can of explaining the Eurodrama quickly.  And here's a homegrown link the goes into greater detail on short-covering.

The day's best gains were seen during the 2nd half of the European session (which effectively ends at noon ET), but short-covering kept the positive trend intact through the domestic close.  To reiterate what I said earlier in the day: European political drama and short-covering don't add up to solid evidence for a meaningful bounce in rates.  That doesn't mean we can't get such a bounce--simply that today is no indication of that in and of itself.