Old people who've been endlessly frustrated by the fact that no one seemed to be concerned about inflation for the past 6 or 7 years are finally having their day in the sun.  Inflation has actually been back in vogue (or en vogue, if you're pretentious) since at least May of last year.  That's when core annual CPI mysteriously began falling from its perch above 2%.  It would then spend several months languishing around 1.5% before revisions. 

Even after revisions, Core CPI was stuck at roughly 1.7% until the November 15th report.  Month-over-month Core CPI only made it up to 0.3% for the first time in a long time last month.  Today's report was important because it confirmed last month's move up to 0.3% and it once again pushed the annual number up to 1.8%.  All of the above builds the sense that inflation is rising up from last Summer's stagnant lows, and bonds are not happy about that at all.

We can assume some traders wanted to sell more bonds before today and were simply waiting to make sure CPI wouldn't throw a wrench in those works.  We can also assume a lot of traders were ready to go either way and simply followed the results.  After all, much of the broader move toward higher rates has been a gradual repricing of longer-term inflation expectations.  This is part of the reason the current move toward higher rates hasn't been remotely as abrupt as the 2013 taper tantrum or the post-election spike in 2016.  Those were individual events.  This is a process.

10yr yields hit new 4yr highs of 2.9204% and Fannie 3.5 MBS tanked by more than half a point.  Rate sheets are ugly and the sky is falling as far as some market participants are concerned.  Others think that every step higher in rate brings us closer to the first major correction for this early 2018 move.  Indeed that's true, but opinions vary as to how far that move will need to go before we see a bounce.