Last week ended on a bittersweet note as a surprisingly strong rally was met with big push-back on Friday.  The jury was out as to whether we were witnessing a firm bounce after hitting the best levels in months, or simply circling the wagons ahead of the new risks in the new week.  The overnight strength (largely courtesy of friendly comments from ECB's Lagarde) means it's easier to view Friday as wagon circling (incidental weakness occurring as a byproduct of traders squaring positions at the end of the week--especially if there are informative and/or risky events in the subsequent week).  

All that having been said, this doesn't mean we can rest easy and simply wait for additional bond market gains to start rolling in.  Friday's correction was driven, in part, by actual uncertainty and defensiveness about the outcome of several data points on Monday and Tuesday.  These include the condensed US Treasury auction cycle (3s and 10s today, 30s tomorrow) and Tuesday's inflation data (CPI).  While none of these events constitutes a make or break moment for bonds, they're all in a position to comment on the recent rally.  In other words, if the auctions can merely offer up average stats, it would be a good endorsement of this new, lower range. 

Then on the data front, the update on inflation is potentially a non-event if it falls close to consensus.  The market has already shown plenty of willingness to look past short-term inflation spikes that could still be argued as transitory and we're definitely not out of that window yet.  But as always, any huge departures from consensus could prompt a correction in the logical direction (i.e. higher inflation = bad for bonds, and lower = good).