"There's a strong argument for a half percent" interest rate cut when the Federal Reserve meets in mid-September. "It's going to be hotly debated."

Even as relative calm has returned in recent days, the likelihood of further shakeouts in currencies and equities, and simmering economic risks, support the case for bonds.

Investors are focused primarily on the Fed, currently pricing in at least two quarter-point interest rate cuts before the end of the year.

"Investors still have faith that the dollar itself, regardless of the state of the actual government, will continue to be the global currency of choice and keep value in a fraught political situation."

Though the how, why, and when remain murky, bond traders expect currently inverted Treasury yield curves to soon normalize.

After a run of solid economic data, the rise in 10-year Treasuries' yield, to 5%, makes them attractive to embattled investors.

Quantitative tightening is "an underappreciated risk" that might keep bond yields higher for longer. Auctions of 10- and 30-year Treasuries were poorly received this month, and supply will keep increasing, thanks to the widening budget deficit.

Yields on 10-year and 30-year Treasuries reached their highest since 2007, extending yield curve steepening which has been a key dynamic of the past month's abrupt selloff.