If you're just tuning in to 2016's bond market trends, it's been a good year so far.  10yr yields began around 2.30  and fell as low as 1.53 for a few moments 2 weeks ago.  That puts the current trend in the same league as the sharpest rallies--the kind that only happen roughly once a year at best.

Oil and equities markets are unquestionably a source of inspiration for bond markets.  The correlation is a bit interdependent and messy, but in general, here are the key considerations (some of these compliment each other, some are counterpoints):

• Oil is lower due to lower demand and higher supply
• Lower oil demand implies a weak global economy, therefore stocks and bond yields are moving lower 
• Counterpoint: higher oil supply is artificially driving prices lower, which is artificially hurting equities markets
• Lower oil prices keep inflation extra low, which in turn provides a fear-free environment for bond rallies
• Counterpoint: oil has to bottom out at some point, and when it does, some think inflation will begin to pick up, thus hurting bond markets
• In the biggest of pictures, the economic cycle could simply be topping-out and embarking on the characteristic 1-2 year downtrend (stocks and bond yields move lower), and oil is simply a sideshow that happens to benefit the trend.

No matter how you look at it, oil and stock prices are a key consideration for bond markets, so we're watching them closely.  Whereas January was a fairly one-sided victory for bonds and a clear-cut loss for oil/stocks, we now must consider that oil/stocks are at least attempting to find their footing.

Observing these bigger-picture trends play out is arguably more important for bonds than the economic data for now.  It's not that the data doesn't matter, but it has been more of a diversion affecting the "fine-tuning" adjustments in bond markets while the big swings in oil/stocks have provided the "coarse adjustment." 

If oil/stocks break above their trendlines this week AND if bonds follow, it would be a good argument for extreme caution--especially considering the last week in February is typically supportive for bond markets.  In fact, bonds haven't lost ground on this week since 2009, when they were on the way back toward higher yields after the apex of the financial crisis rally.