What if It's Not an Inflation Trade, After All?

At this stage in the bull run and economic recovery, the easiest explanation for rising rates would be the late-cycle "inflation trades" we see so often, conjuring up memory of early/mid-2008, where going long plays like Potash and short an already-topped S&P and Nasdaq became the obvious and crowded trade before a crash later that year. 

But an alternative explanation for the sharp sell-off in Treasuries today, coupled with the swift decline beginning as April came to a close, may very well be that the U.S. Bond market is in the early stages of either front-running a June rate hike by the Fed (a decidedly minority view at this point, anecdotally speaking, when perusing social media finance pundits), or perhaps even revolting altogether against the entire global easing efforts of Central Banks around the world. 

Regardless of your view on the above, the simple fact is that Treasuries are getting hit hard today, with rates rising. And yet very few of the "inflation plays," seen in commodities and derivative equites, are responding with much attention at all. To be fair, commodities such as copper and crude have already staged snapback rallies since late-winter off their respective lows, and may simply be marking time sideways before heading higher yet. But gold is showing little urgency regarding inflation, as is silver. 

So perhaps it is not a late-cycle reflation or inflation trade this time, after all, and instead something more proximate to the Fed-centric cycle we have seen since 2007.