U.S. government debt rallied the most in a month yesterday after a report showed U.S. payrolls climbed in September less than analysts projected. The data signal that the economy had little momentum leading up to the partial federal government shutdown that President Barack Obama's chief economic adviser said trimmed 0.25 percentage point from fourth-quarter economic growth and cost the U.S. 120,000 jobs in October. Stocks fell as borrowing costs for Chinese banks jumped.

“If we continue to get poor numbers, 2.4 percent is the level on 10s everyone is thinking about,” said Thomas Roth, senior Treasury trader in New York at Mitsubishi UFJ Securities USA Inc. “We've had quite a rally. The market is certainly positioned for that -- no tapering until March.”

Eoin Treacy's view The expectation that Fed tapering will not begin until at least the end of the first quarter of 2014 has helped support risk assets generally. Treasury yields encountered resistance near 3% from September and continue to unwind the overextension relative to the 200-day MA.

Considering the length of the bond bull market and the effect rising yields would have on investment positions, the total return on US Treasuries is one of the most important charts in the world at present. The Index broke downwards from a more than yearlong range in June and has been ranging below the 200-day MA since. It has returned to test the region of the trend mean over the last month.

Both the yield chart and the total return chart share similar characteristics of having almost completely unwound overextensions relative to their respective trend means. If the bond bull market has in fact ended, the total return index will encounter resistance in the region of the lower side of the overhead top formation.

The threat of tapering was perhaps most keenly felt in bond funds. For example, the Pimco Total Return ETF pulled back sharply between May and September. It continues to rally back up towards the lower side of the overhead trading range and will need to hold above the 106 area if demand dominance is to be given the benefit of the doubt.