10-year yields are rising:

But the breakeven inflation rate is not rising. Fear of inflation is not driving this spike:
The USD Libor rate implied by Eurodollar futures is rising, however. The charts below show the implied rates in Dec 2011 and Dec 2012:
The explanation for these moves must be this: the bond market now believes that the Fed is committed to fighting both inflation and deflation. The current QE programme, or further measures, will eventually generate inflation; in addition, the surprisingly (to some*) stimulative attitude of the fiscal authorities has increased the likely effectiveness of the Fed’s actions; and in response, the Fed will begin a slow tightening cycle in around a year’s time. That is being priced in to the Treasury market.
How realistic is the market being? Since 2007, I have thought that every inflation scare and expectation of rate hikes was nonsense. At my previous job, we were putting on trades to benefit from low rates in December 2010 in early 2009. Now I am concerned that my beliefs have been hardened by success — there will be a tightening cycle one day, and I hope I will be able to see it coming.
*I.e. to anyone who believed that Republican “deficit hawks” were hawkish on the deficit.