They're not done and it's clear to me that these guys really are worried about an inflation bulge. You are seeing clouds on the horizon because of inflation.

Inflation springs from how intensely resources are used. There is an enormous amount of unused capacity sitting out there, and it takes a lot of growth to absorb that.

There really isn't anything in this report that suggests that inflation numbers are going to turn for the worst.

This is a continuation of a trend that's already been in place. We don't have a huge inflation problem, but it seems to me that people don't give enough weight to the possibility something like that is brewing.

He's telling you the Fed's probably got more room to continue to hike, but inflation is not going to be a problem. That tells me that the 10-year doesn't need to move that much, but the two-year note probably is going to track toward a 5 percent fed funds rate.

What's happening is that the inflation premium is being taken out of longer-dated securities.