Should you chase the Treasury rally?

Market volatility may look scary and safe-haven Treasurys may be rallying, but investors shouldn't chase them any higher, analysts said.

"We're not going to chase it," said Simon Ip, director of fixed income at Credit Agricole private bank. "We thought it was too low even at 2.5 percent. Now it's at 2.0 percent, it certainly won't change it."

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Ip sees other places, such as corporate bonds, as better places to seek returns, viewing the sharp moves Wednesday as an "over-reaction" to equity market declines.

The 10-year Treasury yield had its biggest intraday swing in six years Wednesday, with rates dipping dramatically to as low as 1.86 percent, the lowest since May 2013, before retracing some of the decline to around 2.1 percent. Bond yields move inversely to price.

It was the biggest one day move since November 2008, according to Jefferies. The yield was around 2.087 percent in late Asian trade.

Before this week's volatility, credit investors considered core government bonds their least favored investment, according to Morgan Stanley's quarterly global credit investor survey. Of those surveyed, 49 percent expected the 10-year yield would be between 2.25-2.75 percent within six months and 46 percent expected it between 2.75-3.25 percent.

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Ip isn't alone in thinking the move likely isn't a trend. For one thing, analysts just don't believe U.S. interest rates can head much lower, especially with the end of the Fed's quantitative easing bond buying program set for the next several weeks.

"A further decline in rates led by Fed expectations is limited," Priya Misra, a rates strategist at Bank of America-Merrill Lynch, said in a note Wednesday, noting the market is already pricing in a "neutral' fed funds rate of 2.1 percent, the lowest since last year's taper tantrum when the first expected interest rate hike was expected to be 20 months away instead of current expectations for around 12 months.

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"The Fed's threshold to restart QE is very high due to a worsening cost/benefit picture. It will require a real risk of deflation and/or recession. In the absence of QE, the market rarely has pushed out the timing of the first Fed hike for more than a year," she said. But even if the market pushes the expected timing out another two months, it's likely to only translate into a 6 basis point move in the 10-year Treasury, she said.

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To be sure, Misra noted that if markets stay volatile, it would likely attract safe-haven demand for Treasurys, although term premiums – or the additional yield investor demand from longer-dated assets over shorter-term ones – are already negative, something historically associated with a crisis, such as when Lehman Brothers collapsed.

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Misra believes the drop in yields Wednesday was due at least in part to dealers capitulating on their short positions on Treasurys.

"The lack of a move higher in yields after the strong September payroll report may have triggered some more short positions, which are being flushed out," she said.

—By CNBC.Com's Leslie Shaffer; Follow her on Twitter @LeslieShaffer1