Rates are surging higher yet again.  It wasn't necessarily destined to be the case.  In fact, rates could just as easily be moving lower.  the problem is the data.  Everywhere we look, at home and abroad, there are signs of slightly hotter inflation.  We have been expecting the market to be paying most of its attention to these data points and that's exactly what's been happening.  It just so happens that the data points are not friendly to our cause.

The latest examples come in the form of EU inflation data overnight and this morning's domestic data at 8:30am.  Labor Costs surged in Q4 and last week's jobless claims remained under 200k.  Neither are big-ticket market movers, but again, traders are scrutinizing data right now, looking for signs of a shift or for the persistence of inflationary pressure.

The results have been clear in Fed Funds Futures--now well into the 5's.