The bond rout abates for now, but what exactly is the big picture story?
Things are looking calmer after the rout in the bond market yesterday
10-year Treasury yields are down slightly but sticking close to 1.30% with 30-year yields also a little lower below 2.10% for the time being.
While we are seeing a brief pause in the selloff, it is looking increasingly unlikely that the market will let up in the coming week(s) as the reflation narrative gathers pace.
Fed officials are likely to come out to try and calm nerves but if Daly's remarks yesterday are any indication, they aren't too concerned about current developments yet.
The real question remains what is the market really trying to say here? Is it really all about being caught up in the hype that inflation is coming back?
If so, then perhaps we are seeing market participants get too ahead of themselves as sustained higher inflation is really another story.
A key debate in all of this is when inflation does tick higher in the coming months, are central banks really going to react by raising rates? How much pressure will they face from the market and will they not be bullied into making such a decision?
In any case, this is going to be a major development in the market this year that might take months to sort itself out.
For now, the bond rout may yet extend further with 10-year yields eyeing 1.50% and 30-year yields eyeing 2.20% as we look towards the coming weeks.
The main thing to watch in that regard is how fast are we going to be headed to those levels, as that will have spillovers to other asset classes - as we saw yesterday.
Although, equities are still taking things in stride for the most part. But the slight hiccup early on yesterday may suggest that rising yields is perhaps a potential threat to the 'buy everything' rally in recent months.