From a technical analysis standpoint alone ( I am not considering anything fundamental ) the chart has experienced a downside breakout. There is one last level of chart support back at those October lows near 2.46 - 2.47%.
Did the Fed just start a new QE program and I missed it? Some of the Treasury buying in recent weeks has been attributable to safe haven flows related to events in Ukraine but that in and of itself is not sufficient to have produced the steady influx of buying in the Treasury market.
Why this is so noteworthy in my mind is that the Fed has provided forward guidance suggesting that while their tapering plans will proceed, no interest rate hikes are being considered until 2015-2016. Most of the big players split the difference and projected no hikes until mid-2015.
However, if the PPI, which is notoriously more volatile than the CPI, shows a trend towards higher wholesale prices, then that would bring into question any rate hike delay of that length of time. We really do need to see that CPI number tomorrow to get a sense of what is taking place.
As you can see, there are a lot of uncertainties right now. I can tell you one thing, mortgage company risk management departments must be spinning this morning. Imagine trying to initiate a hedging program in this environment. One day we are getting surging payrolls numbers and chatter of higher rates. The next day rates are plunging lower. No wonder we are getting the types of wild swings in prices in so many markets. Commercial hedging interests are also getting whipsawed and ripped to shreds let along hedge funds who are experiencing some sizeable losses.
Traders - be careful - watch the size of those positions you put on. Keep them manageable or you are going to end up with some big losses if you are not glued to your computer screen.
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