We've been steadfast in characterizing this week's sell-off as a "correction" to the strong rally that preceded it.  One might have argued that the risk-aversion trade at the end of last week was the last straw, pushing yields all the way down to 2.016% and setting us up for an even more abrupt correction once the risk events had passed.  

Today looks like a good test for the unpleasant correction.  If any set of events would have given the weakness license to continue, we had them today.  The overnight session saw the Bank of England Announcement push British bond yields sharply higher, pulling the rest of the global bond market along for the ride.  US Treasuries began their day in weaker territory as a result.

Then the day's hotly-anticipated CPI data came out stronger than expected with the headline monthly reading at 0.4 vs 0.3 forecasts  and the core year-over-year reading at 1.7 vs 1.6.  Logically, bonds should have weakened after that data, and they did!  But only for a few minutes.  Moments after 10yr yields touched the 2.22% technical level, buyers emerged, bringing yields quickly back down toward 2.20.  

Then came headlines that North Korea could be readying another missile launch.  These may have added to the mini-rally in bonds, but notably, bonds held onto the subsequent gains whereas stocks returned to previous levels.  If we were truly dealing with geopolitical risk affecting markets, we'd expect to see more unity between stock and bond movement during the rest of the day. 

Bottom line: bonds had an open door to move into weaker territory and refused to walk through.  That makes this the best day of the week and the first potential evidence that the correction is out of steam.