The narrative seems to revolve around 'peak inflation' after the US CPI report earlier in the week. 2-year Treasury yields have dropped from a high of near 2.60% to just below 2.32% currently. Meanwhile, 10-year yields are down to 2.67% from a high of near 2.84%.

In the big picture, the slight drop here isn't indicative of much as yields have surged rather tremendously since the turn of the year.

The key question though is what comes next? And that's going to be a tough inquiry to resolve.

For one, markets have priced in quite an aggressive Fed outlook already with expectations that the Fed will continue to press forward with rate hikes towards 3% perhaps. If there is any loose ends to that view, expect yields and the US dollar to see a further shave off the top.

As such, inflation data is paramount at this point. If we do see 'peak inflation', that might help to soothe the bond market a fair bit more.

And from a technical perspective, 10-year yields are contesting the 200-month moving average and that is a key level on the chart to watch in the next few weeks: