Normally, when the bond market is in a pervasive selling trend, we'll see a day or two of reprieve amidst the carnage. Frequently, such days are friendly enough to lead to questions about whether they're evidence of a bounce. At the very least, when trading levels are much stronger on the morning after several days of big selling, the gains tend to do an OK job of sticking around through the close. But that has definitely not been the case over the past two days. Today is shaping up to be a simple carbon copy of yesterday, albeit with a bit of extra oomph.
It's possibly notable that the weakness is a centered on the center of the yield curve. This could indicate some concession selling ahead of the 5yr Treasury auction, but that alone would not account for the reversal seen so far today. More notable is the adjustments in Fed Funds Futures where traders are pricing in another 5-6bps by next year. That's the biggest move up since last week's Fed announcement and it began around the same time the broader bond sell-off began.
We don't ever love oil prices as an explanation for intraday market movement, but the jump from yesterday's lows could be getting some attention and contributing to strategic trading decisions that didn't hit the market until the 9:30am NYSE open.
Last but not least, it is "month-end" on Friday and early month-end position squaring could also be contributing.