Bond yields will continue to rise, but don't say that the Fed has lost control. Actually, this is Chairman Bernanke's gift to his successor as he heads toward the exit.
After printing 2.88 percent on Monday, 10-year yields have drifted back down to 2.82 percent. Very soon, taper talk will morph into actual tapering, and Treasury markets will have to get used to less Federal Reserve sponsorship.
(Read more: For bond investors, it feels a lot like 1994)
The economic data over the past few weeks has been fairly decent, and certainly not anywhere close to bad enough to change Chairman Bernanke's mind. An often overlooked element of the rate debate is the chairman's desire to leave his replacement with sufficient two-way policy tools to deal with potential economic problems.
In other words, if the Fed chairmanship changed hands while 10-year yields were at 1.5 percent, the new chairman (or chairwoman) would have precious few policy tools to deal with issues that may arise. For that reason alone, I would expect the Fed to continue to massage rhetoric in order to engineer higher rates.
(Read more: September or December taper—does it really matter?)
So what am I doing with bonds today?
I am looking to sell the September 10-year note futures contract at Tuesday's high of 125.09, with a downside objective of 124.04. A trade of 126.01 will stop me out and return to neutral.
For more on bonds—and potentially updated levels from me—tune into "Futures Now" at 1 p.m. EDT.