Rates are jumping right now after global central bankers promised inflation is eventually coming. Bond yields jumped dramatically in Europe and are rising in the U.S. as central bankers have re-emphasized inflation.
But it was this comment that got the bond and currency markets moving: "Now, we can be confident that our policy is working and that those risks have abated. The threat of deflation is gone and reflationary forces are at play."
There's the magic word: reflation. On that, the euro rose to almost its highest level since November of last year. In Germany, 10-year bond yields rose 12 basis points, to 0.37 percent, a 40 percent increase, and French 10-year yields rose 19 percent.
What's odd is Draghi's insistence that the bank's current stimulus program needs to stay in place because inflation still is more muted than expected.
Draghi, of course, is playing the old game of talking both sides of his book, but Peter Tchir, macro strategist for Brean, told me the markets were reacting to that magic word, reflation: "The bond markets are clearly focusing on the 'new news' of Draghi talking reflation rather than the 'old news' that inflation is muted," he told me.
Whether there are longer-term effects to his remarks are not yet clear. However, central bankers seem eager to talk up reflation. Philadelphia Federal Reserve President Patrick Harker today reiterated that the Fed remains on track for another 2017 rate hike, and that recent inflation weakness appears to be temporary. He said, though, that he believes the Fed will not achieve its inflation target of 2 percent until early 2018.
Bond yields are up in the U.S. as well. The U.S. 2-year note hit a high yield of 1.377 percent, the highest level back to March 15.
"People have been long Treasuries right across the board, and I think these comments are triggering some stop losses," Tchir told me. "The idea of staying long bonds as a hedging strategy for stocks is getting a little long in the tooth."