Tame inflation? Don't get complacent!

The Treasury market rallied last week when the 10-year Treasury yield tested the 3% level and pulled back.

The decline in yields (and bond prices rally) was not a big surprise for a number of reasons:

• 10-year yields (TNX) was exhibiting a negative RSI divergence
• A tamer than expected Consumer Price Index
• Hedge funds were in a crowded short in the 10-year T-Note and T-Bond futures

While the bond market rally is likely to have a bit more leg over the next few weeks, my inclination is to enjoy the party, but don't overstay the festivities.

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