Dow futures were down approximately 50 points in pre-opening trading on Thursday; bond prices were slightly higher to start the day. European traders are mimicking the current trading levels in Europe. There were rumors on Wednesday of a breakthrough in the Greece/EU talks, but there was no breakthrough. And bond traders are hoping that will stay that way.

Make Dwight A TRUSTED Part Of Your Day

Read more insights from Dwight Johnston on TrustCU.com or register for his Daily Dose e-newsletter to receive his blogs straight to your inbox.

read moreRegister Now

The yield on the German 10-year note jumped to 0.85% at the close of Wednesday. Think that doesn’t sound like much? Consider the yield on that note was 0.05% less than two months ago. The losses are mounting for speculators, and some are giving up on the trade. Remember, the bond bull trade there is based on deflation and the supposed lack of bonds that investors would be willing to sell to the European Central Bank. Recent evidence supports the case this is not happening.

The U.S. bond market wasn’t based on deflation, it was based on near 0% inflation. Plus bond traders were counting on a continued rally in the dollar and European bonds. Those assumptions are also highly questionable.

Click here to read moreabout the breathing room in bonds and what big rallies that have offset big selloffs over the past four months mean for today.

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.