The take-away quote from Yellen this week, "The relationship between the business cycle and the yield curve may have changed." There was little supporting evidence for her view. It is the hope of the Fed that further rate increases which may further flatten the yield curve will not reverse the current course of the economy.
The curve has not inverted, which is the actual sign of a potential recession, but has only flattened, albeit the flattening has occurred at a fast and more consistent rate in the last year. Bonds still do not have a risk premium, expected inflation has not appreciably changed over the last year, and higher growth has not moved the real rate of interest higher. Long bonds are not following the script of moving higher with the Fed normalization.
Additionally, bond traders still have in the back of their minds the view that an overvalued stock market will need Fed support sooner than later. Another reason to put less stock in three Fed increases for 2018. In a global context, a tightening Fed coupled with continued savings around the world suggests that dollar denominated bond demand is still high.