Bond Yields Rise, Is this the great rotation?

Markets may be “ahead of the Fed” ……The 10 year Treasury hit 2.36% today, a 7 month peak. Some of this is due to solid early economic reports for May (private sector employment, etc). But the major “game changer” this week was inflation ticking up in the Euro zone, finally quelling much of the deflation fears by their central bankers. This caused the German bond to hit 0.89% (remember it was in near negative territory 2 months ago). The ECB President, Mario Draghi, reaffirmed the bank’s commitment to QE, but noted the upward tick in inflation. He also hinted that the “full bazooka” of massive bond buying may be ebbing. The specter of a deal between Greece, creditors and the IMF is also contributing to the lack of demand for US Treasuries. The ultra-low Euro bond yields were acting as a “drag” on Treasury yields, signaling the potential end of relatively low US Treasury yields and a partial return to “normal… stay tuned… David R. Pascale, Jr.