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Higher Treasury yields, please

At 3.91% as I write this, the yield on 10-year Treasury bonds is only 4 bps lower than its 2009 high which was recorded last June. That high, in turn, occurred about the time that the market began to sense that the economy was emerging from the recession that began in early 2008. I continue to believe that yields on the 10-yr T-bond serve as an excellent gauge of the market's expectations for growth in the U.S. economy. It looks to me like the economy is capable of 3-4% growth, so if the evidence continues to accumulate in support of that, I would fully expect 10-yr yields to rise towards 4.5% or higher. This will not be cause for alarm, it will be simply a confirmation of improved growth expectations, and as such should pose no risk to the stock market.

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