A large group of people, apparently including you, missed the endless pre-taper announcements.
"We're gonna taper soon. Soon we're gonna buy fewer bonds"
Then they missed the progress of the taper.
"We reduced our purchases by $10 billion. Next month we'll reduce by another $10 billion"
The they missed the announcement last October.
"We're done. QE has ended. No more additions to the Fed balance sheet at this time"
These well informed, sophisticated investors, could, at any moment, discover the Fed stopped their buying 10 months ago and sell the Treasuries they don't own?
Maybe they'll call the brokers they don't have in order to sell the Treasury futures they never traded?
How, exactly, will their sudden realization cause rates to skyrocket?
How, exactly, will their sudden realization cause rates to skyrocket?
The exact mechanism is the lack of sustainable demand. The unsustainable demand comes mainly from episodes of worldwide deflation creating specific demand for dollars and carry trade unwinds creating relative demand for dollars in exchange for whatever other currency was previously speculated in. The dollar demand translates into treasury demand since those are easier to obtain. Plus, as I mentioned, the there are the foreign buyers that crop up mysteriously from time to time.
Obviously it is in the Fed's owners' and supporters' interests to keep interest rates low. They don't have to do much if the rate psychology stays low. Part of the rate psychology is the Toddsters of the world telling their respective forums that low rates are market magic and have nothing to do with the Fed.