Government bonds in the USA and Europe sold off sharply as a number of compounding factors indicated that fears of deflation appear to have been overdone. The price of oil has continued to tick up in response to falling oil inventory data as rig closures start to bite. Although OPEC announced that a return to $100 oil is unlikely in the next decade, any rise will ultimately be inflationary. Furthermore, the stability of oil prices appears to have led many to sell their large bond positions as worst case deflation fears ease. However, bond trading liquidity is currently low and the unwinding of the large consensus trade was more than the market could easily absorb, leading to quite large falls in bond prices despite the relatively low value traded. The implied rise in interest rates also put pressure on stock markets on both sides of the Atlantic. The FTSE 100 was also under additional selling pressure as stronger than expected industrial production data implied a higher likelihood of rate rises later in the year. The FTSE 100 closed down -1.37% at 6,933.80.