Traders blame the surge in Treasury buying this week on everything from short covering and China buying to a flight to safety amid global economic jitters.
But Rick Rieder, BlackRock's co-head Americas fixed income, said it's likely a confluence of factors, noting the trend may have turned on the front end. He expects the 10-year yield to rise to 3.0-3.25 percent by year-end.
The move comes as global rates fall and the U.S. market looks attractive relative to German Bunds and Japanese government bonds, he said.
Easy policy from major central banks is fanning buying. The Federal Reserve has promised low rates for longer, even as it slows bond purchases, and so far inflation is not an issue. But the European Central Bank has been a bigger catalyst recently. It's expected to cut rates next week and possibly discuss an asset purchase plan. This sent rates lower in Germany and around the periphery.
"I certainly think we've bottomed in the front end and the back end stays in this range with the proclivity of moving moderately higher. I think we're going to stay in a low range for quite a long time," Rieder said of Treasury yields.
Yields fell Thursday morning but by afternoon were off their lows. The 10-year yield was as low as 2.41 percent Thursday but moved back to 2.44 in late trading.
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Despite the one percent contraction in first quarter gross domestic product (GDP) Thursday, which was blamed on a significant inventory drag, many strategists say U.S. economic data is not behind the move because it's not weak enough. Economists began raising their second quarter growth forecasts to 3 percent plus as they expect a boost from inventory building.
Traders said part of this week's rally is the result of buying from Asia and portfolio managers picking up Treasurys before month-end.
Short covering and re-positioning by portfolio managers who were under-invested in bonds this year are also at play, they said.
But Marc Chandler, chief currency strategist at Brown Brothers Harriman, pointed out that investors are actually adding shorts. He said the latest Commitment of Traders data shows that in the week ended May 20, gross short positions on 10-year futures contracts rose by 26,100 contracts to 529,000 contracts – the most since 2004/2005.