Surprises drive bond markets

The link between economic surprises and bond yields have been very strong. When there have been positive surprises there usually will be a gain in yields. The relationship is far from perfect but it is not holding true under the current environment. The Fed is keeping rates much lower than they would be if there was no intervention in the bond markets or an effort to talk down yields over the next two years. There is a lot of upside pressure building in bonds yields. If the Fed was not involved, rates would clearly be higher.