Citing “surprising reasons” in a headline is only a few steps above “one weird trick” on the click-bait scale, but in today’s case, it’s warranted. We came into today expecting some combination of the Retail Sales report and the Fed’s meeting minutes to account for interest rate volatility. As it happened, neither of those events had much of an impact on the bond market (bonds determine rates). Rates nonetheless moved quite a bit higher because bonds were reacting to events in the overnight trading hours, well before either of today’s big ticket domestic events. The key culprit was a surprisingly hot inflation report in the UK. Giving credit to UK inflation data for US rate movement seems like a lot to ask when, just last week, we were explaining why cooler US inflation data failed to push rates down in any significant way. In other words, if lower inflation in the US doesn’t help rates, why does higher inflation in the UK hurt rates? This is a great question with a complex answer. One part of the answer is that markets are more defensive about inflation coming in higher than expected right now. There is a broad expectation that inflation metrics will continue calming down in coming months. Last week’s domestic data agreed. So even though it was lower than expected, all it needed to be was lower than the previous month in order to endorse the bond market’s prevailing trading pattern–at least when it comes to trading inflation.