After lying quiescent for many months, volatility has suddenly returned to government bond markets. Many investors have been surprised by the ferocity of the move and are asking themselves whether this is anything more than a tempest in a teacup or the beginning of something bigger. In our view, a combination of fundamental and technical factors came together to cause a rush for the exits.

Firstly, poor valuations and extremely skimpy yields provided no safety cushion against capital losses. Secondly, the collapse in oil prices mechanically contributed to negative CPI prints, validating very low nominal yields and feeding fears that the deflationary tail risk had gained the upper hand. When oil and CPI figures rebounded, support for this view gave way. Lastly, momentum and trend following had probably moved market positioning and sentiment toward an extreme. Bonds have simply corrected back with the inflation rate, no doubt flushing out a number of shorter-term investors. While it is always difficult to call a turn, there is not yet enough evidence to suggest that the bond market is in the foothills of another major debacle.

The US Treasury market ten-year benchmark yield troughed toward late January at 1.68% and has risen to 2.28% as of mid-May, giving back all of 2015’s gains in the process. The correlated move by its European peers has been more tardy and more aggressive. Core ten-year EMU government bond yields troughed on 17 April around 0.08% and bounced up to around 0.72% in about four weeks, bringing yields back to early December 2014 levels, well before the European Central Bank’s (ECB) QE announcement on 22 January. This move can’t be seen as a flight from safety in favor of the zone’s periphery as Italian benchmark yields suffered in unison, reversing from just over 1% to just under 2% over the last few months, in spite of the ongoing Greek drama. Clearly something has changed since the beginning of the year, particularly in Europe.

The ECB’s January announcement of full-blown QE was to some extent front-run by the bond markets, although President Mario Draghi’s ability to exceed expectations once again, in terms of size of the package—€60 billion monthly purchases for at least 18 months—may have brought in additional buyers riding on the coattails of this dominant player. Coinciding with the ECB’s announcement, deflationary hysteria peaked in January as annual US and Eurozone CPI slumped to -0.1% and -0.5%, respectively. This measure is itself highly correlated over the short term to oil prices, which collapsed from over $100 in June to a nadir of $46 for benchmark Brent crude on 13 January. In the United States, the Federal Reserve’s preferred measure of inflationary expectations, the five-year forward five-year implied inflation rate, plunged from 2.5% in July 2014 to 1.93% on 29 January. Similarly, core Eurozone ten-year breakeven inflation fell from around 1.5% at the beginning of 2014 to 0.6% on 6 January 2015, a couple of weeks ahead of the ECB’s announcement.

So what’s changed? Since January, oil has bounced almost 40% to around $61, and annual Eurozone inflation has “recovered” to 0%, with core expectations moving back up to 1.25%. Eurozone growth is improving, and in mid-April, the International Monetary Fund revised up its 2015 growth forecast for the region from 1.2% to 1.5%. Some have also suggested that dwindling liquidity in the bond markets due to regulatory and capital constraints on banks exacerbated the move.

The fact is, this move has not been large by past “rout” standards. The infamous bond bear market of 1994 saw US Treasury yields move up 200 bps over a similar period, and even 2013’s taper tantrum saw yields move up about 100 bps over two months, compared to what has so far been a 60 bp move in just over three months.

In short, government bond yields have recently moved with inflationary expectations, which have in turn been moved by oil prices and central bank reflationary measures. Barring the long-awaited move up in wage inflation finally appearing, investors should not read too much into the latest swoon.

Stephen Saint-Leger is a Managing Director on the Cambridge Associates Global Investment Research team.