Bond rallies = lower rates.  We like bond rallies.  But when rates fall too quickly or consistently, it can be too much of a good thing.  That's a phenomenon we were already discussing in the first half of last week, but Friday's rally took it to the next level with 10yr yields moving below 4.20%.  That's an 80+ bp rally in just over a month and our best justification was the fairly weak "no whammies" narrative (we'd prefer to see big rallies in response to big, obvious catalysts that leave no room for doubt or speculation).  With all of the above in mind, and in the absence of any new catalysts this morning, we're resigned to characterizing this morning's weakness as the logical reaction to Friday's "too much of a good thing." 

The other way to look at the last few weeks is to scrap the notion of a horizontal range boundary (probably a good idea, in retrospect) and instead view it through the lens of a larger, directional move in which yields took a quick break in the 2nd half of thanksgiving week (highlighted below) and then got back to the rally the following week ultimately overshooting only slightly.  Viewed in this light, today's selling pressure puts yields perfectly in line with the trend.

The nice thing about all this analytical uncertainty is that it's almost certain to give way to clear cause and effect as the week's big ticket economic reports start rolling in tomorrow.