The week is getting off to a weaker start. Bonds rallied in the first hour of overnight trading but began to lose ground steadily after that. By the domestic session, yields were trading several bps higher vs Friday afternoon, but still substantially lower than last week's highs.
Bonds continue responding to multiple inputs with the two biggest considerations being the overall safe haven trade surrounding Ukraine and the inflation trade being driven by commodity price spikes. There was a delayed reaction to the overnight oil movements. 10yr yields first rallied with higher oil prices as the market was pricing-in elevated geopolitical risk.
Later in the morning, they adjusted for inflation. How do we know? We can actually see it happen when we break down TIPS yields and inflation expectations.
In other words, investors made a move to price in inflation at 715am, and that greatly contributed to the AM spike in yields. Fortunately, things look to be stabilizing at the start of the NYSE session. It's still anyone's game.