I'm not sure I've heard anyone genuinely say "oh my!" by way of exclamatory response in quite a while.  But the odds increased today with a rather surprising 3/8ths point gain in MBS and a 7.5bp drop in 10yr yields. 

Why surprising?  

First of all, there was nothing big and meaningful on the event calendar, and even in hindsight, we didn't see any big news or any big piece of data that motivated the trading response.  Moreover, it would not have been a surprise to see bonds stick to their recent sideways trend through the end of this holiday-shortened Spring Break week.  After all, we're still not expecting to see true colors until the first week of April.

That borderline complacency ended up creating an opportunity for volatility.  Sorry for so many words ending in "y" in that past sentence.  What I mean is that the baseline scenario was, perhaps, too obvious.  Here we were in this "same old" range between 2.8 and 2.91% in 10yr yields.  We'd just bounced at the lower boundary as of late last week so it only made sense to bet on rates edging higher throughout this week--returning to the central safety of the range--and then to sort everything out when markets were more liquid and active next week.

With all of the above in mind, more than a few traders were betting on rates moving higher (i.e. "short" Treasury bets) and thus we had ingredients in place for a snowball rally (when shorts are forced to cover, rates move lower, thus forcing more shorts to cover).  We just needed some motivation.

Motivation came courtesy of unexpectedly steady month-end bond buying.  With a full closure on Friday and a half day on Thursday, Traders apparently viewed today as one of the last good opportunities to take care of March's business.  Combine that with weaker stocks at various times of the day (and significantly weaker stocks in the late afternoon) and we had 2 good hands, perfectly shaped for snowball pushin'!