Bond Brief: Yields Spike Again

Fourth-quarter corporate profits jumped 14.4% to post a 21.3% year-on-year gain. The Commerce Department said the quarterly rate of increase in after-tax profits was the strongest for any three months since an 18.9% jump in the fourth quarter of 2001. The strong gain follows a Hurricane Katrina-related decline in the third quarter.

Strong balance sheets allow companies to absorb rising input costs and could create a case for strong business investment in 2006.

In other economic news, the Labor Department said that weekly initial jobless claims fell by 10,000 to 302,000 vs. consensus estimates for claims to come in at 305,000.

"There is sustained growth in these numbers," says Bohlin, who believes the Fed will take the rate to 5.25%.

Fed funds futures are pricing in 100% odds that the Fed will raise the overnight lending rate another quarter-percentage point to 5% at its May meeting. The odds of a move to 5.25% at the June meeting are about 20%, up from 0% at the beginning of the week.