Bond prices rose because the market was excited at the idea that the number of further rate hikes needed would not necessarily be large. The market is thinking that the Fed has two more rate hikes to go.

The PPI number had some pipeline pressure underneath the surface, but the market liked the fact that the core rate was up only 0.1 percent,

The PPI number had some pipeline pressure underneath the surface, but the market liked the fact that the core rate was up only 0.1 percent.

The increase in orders is particularly welcome. The bond market may like the fact that the prices paid component dropped 11 points, reversing most of the big gain in November. Analysts are banking on strength in manufacturing next year to offset some of the expected weakness in housing related consumer demand.

The bond market took this report as a sign that core inflation may be bottoming and the Fed may still be in the tightening business later this year.

The bond market took this report as a sign that core inflation may be bottoming and the Fed may still be in the tightening business later this year,