On moderate trading into the weekend, 5-yr and 10-yr UST yields are back near their intra-day highs. The upward pressure started the day exclusively from real interest rates, but then spread into inflation expectations as well. More important data arrive next week, and traders will be on standby for any signs of encouraging economic news. They can forget – for a while – the Fed’s pause is not controlled by second quarter news but by third quarter trends. US stocks produced the biggest gains on the day, as the rest of the world was not quite as encouraged by good China data. Banks, industrials, and tech are leading the S&P 500 higher, finally past the 2900 hurdle as of late afternoon trade. China may have provided a rationale for higher inflation, but there was little in March CPI to suggest there’s a problem. Quite the opposite. The first article is a long look at key price/labor market relationships to guide fixed income portfolio managers past the minefields embedded in the Phillips Curve. It lists four steps that work now, so investors don’t have to wait for the Fed’s long reconsideration of its inflation target and communications. Coincidentally, Market Update has four recommendations in light of the 3-6bp move higher in rates today. It also explains why 5s are attractive when they show near-zero risk of a Fed rate cut in the next 3-4 years. Last, an array of charts in Inflation Lab II to demonstrate the overall low profile of inflation after a year that should be pushing it higher by now. The Weekly Report will not publish next week.