Bonds and notes were hit hard on a continuation of the equity rally, and liquidation in anticipation of this afternoon's release of the Fed's minutes. Also weighing on Treasuries was a significant downdraft in the greenback. However, going forward we wonder if this move will last. After all, seasonal tendencies point toward supportive Treasury prices and equities may be facing a significant technical barrier.

On the inflation front, yesterday's PPI numbers showed a significantly larger jump in price pressure than was expected. Likewise, this morning's CPI was reported at an increase of .7%, a little hotter than anticipated. Additionally, the FOMC minutes mentioned that While most members did not see large scale purchases of Treasury securities as likely to be a source of inflation pressures given the weak economic outlook, public concern about monetization could have adverse implications for inflation expectations.

Hopefully, the state of Michigan isn't an indication of things to come for the U.S. economy. The state suffered an unemployment rate of just over 15% in the month of June. I am not convinced that the U.S. will see similar numbers, but I do think that the Treasury market will refocus on the sluggish economy and recover from the current some point.