There were two opposing signals in today's preliminary May consumer sentiment survey from the University of Michigan. The dovish indication came from the main sentiment reading, which plunged to 67.4 compared to 76.0 expected.

However the bond market instead focused on rising inflation expectations.The measure of 1-year inflation rose to 3.5% from 3.1% and is now at the highest since November. The 5-10 year measure also rose to 3.1% from 3.0%.

The numbers are particularly worrisome to the market given that next week's trade will be dominated by the CPI report. US 2-year yields are up 4.8 basis points to 4.85% with similar rises across the curve. The rise in yields started before the data but accelerated afterwards.

US 2s intraday
US 2s intraday

Is the market missing something?

Ian Shepherdson from Pantheon Macro thinks so. He said he's "amused by Treasuries selling off because the Michigan survey shows slightly higher inflation expectations. The survey is switching to web from phone, and the U Mich people have noted that web responders consistently have slightly higher inflation expectations. No big deal."