Like 8 other Wednesdays each year, today brings a healthy dose of volatility risk from the Fed Announcement and press conference (note: this is one of the four that is NOT accompanied by "the dots," which tend to add even more volatility).  If the bond market has any strong reaction to the Fed, it won't be due to any changes in policy.  Those aren't even on the table for this meeting.  Rather, investors are simply seeking to refine their understanding of the Fed's covid/econ/tapering reaction functions.

If the Fed can provide such a thing, it could easily account for a break outside the recently narrow range in longer-term bonds.  That narrow range is a product of competing forces to some extent, with global markets (EU/China) pulling yields lower and US equities suggesting a bounce in the past week and a half.  The bigger consideration, however, is the recent "delta drop" in yields (due to rising covid case counts).  In that context, the recent sideways reflects the bond market's typical pattern of leveling-off after a relative quick move.

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Here's the surge that prompted the "delta drop" above.  

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This chart is a key consideration for the Fed.  It's unfortunate that the surge appears to be very much "in progress."  Given what we know about the Fed's stance on accommodation and the state of pandemic, it's hard to imagine Powell speaking too hawkishly in today's press conference.  The catch is that everyone else knows that.  Thus, markets have traded accordingly.  In other words, a dovish, cautious, "wait and see" stance from Powell is the baseline expectation.  

The announcement itself is at 2pm ET, and Powell's press conference starts 30 minutes later.