We see a possible rally this month as investors take advantage of yields at these levels. We may test the 4.5 percent level again this month.

Sentiment is building that the Fed may pause for a while after raising rates to 5 percent next month. That helps shorter-maturity debt, especially two-year notes.

The Fed is concerned that higher energy costs may give an adverse impact on growth rather than posing a risk to faster inflation. Producer prices also showed latent inflationary pressure eased.

The economic picture has not changed and it is still one that shows growth will be strong. The data we are seeing does not argue for a sustainable decline in yields.

The current fed fund rate of 4.50 percent seems to be serving as a floor for the 10-year yield.

The inflation data we will see this week and next will support the view the Fed can keep on hiking at the next two meetings. Yields will rise led by the shorter-maturity debt.