What appeared to be the making of another strong bond rally was cut short yesterday by a sharp decline in the dollar and profit taking.

Traders said there were two reasons for the bond rally.

And within a few minutes, the bond rally also began to fade.

And, as the bond rally itself suggests, inflation expectations seem on the whole to be improving.

Still, there were signs last week that the corporate bond rally could reverse.

Most economists explained the bond rally by pointing to the inflation numbers.

"But seeing the long bond rally is probably the best thing" for it.

Yet the bulls believe that the bond rally has more in store.

Such concerns sent stocks sharply lower last week and started the bond rally.

A bond rally such as yesterday's, though concentrated at the longer end, would normally win a warm response from investors in stocks.