Bond prices are higher now as the German bond market is better, but bond traders are probably tiptoeing around and hoping not to disturb the beast. The price action yesterday was something to behold, and by the end of the day, the longer-term securities closed at new yields for the year.

Yesterday’s retail sales report initially helped the bond market but then sent the dollar reeling. Traders most fear a weaker dollar because they worry about foreigners having to sell U.S. assets to cover currency losses, and they know one of the underpinnings of the low-rates-forever thesis is fading. In the minds of bullish traders, a strong dollar would freeze the Fed in its tracks and also raise fears of deflation. That argument suddenly looks weak.

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On the economic front, weekly jobless claims fell 1,000 to 264,000. Employers might not be hiring at a rapid clip, but they are hanging onto the employees they have. The Producer Price Index fell by 0.4%, and the core rate fell by 0.2%. Both of these were much lower than expected, but the markets had no reaction. PPI simply doesn’t matter to the markets.

Dwight Johnston is the chief economist of the California and Nevada Credit Union Leagues and president of Dwight Johnston Economics. He is the author of a popular commentary site and is a frequent speaker at credit union board planning sessions and industry conferences.