As we survey the landscape today, each of these factors has stabilized or reversed.
Read MoreDow rallies within 100 points of all-time high
First, the yield on the 10-year German bund has increased sharply to 0.68 percent from a low of about 0.08 percent in mid-April. At the same time, the yield spread between the 10-year Treasury and the 10-year bund has narrowed to about 159 basis points from the high of about 190 basis points on March 10. It seems clear that the dramatic widening in spread between the two bonds (over the previous couple of years) had triggered some arbitrage investing. Indeed, we recently heard some very public comments from a couple of major hedge-fund investors arguing that the German bund (and other European sovereign debt, for that matter) had become dramatically overvalued (meaning yields were too low). This assessment was due, at least in part, to the wide yield spread that had developed.
Second, the price of oil has bounced quite dramatically from its lows. In fact, the price of a barrel is up about 28 percent (for WTI crude) from the low in mid-March. The stabilization in energy prices has helped convince bond investors that perpetually lower oil prices will not lead to more widespread deflationary pressures.
Read MoreHere's where the new 'bond king' sees yields
And finally, the dollar has dropped about 6 percent against a basket of major currencies since mid-March. Here again, the firming in the dollar has convinced some bond investors that a continued surge in low-cost imports (resulting from a stronger dollar) may not cause more widespread deflationary pressures.