Is it Inflation or Economy?

Bond prices and rates move in opposite directions. Yields tend to go up when the economy is robust. That's because there is less incentive to buy stodgy Treasuries at a time when riskier assets like stocks look more rewarding.

So the fact that bond yields are still a lot closer to 3% than 4% shows that fixed-income investors are still nervous about the economy, a stark contrast to stock market investors who have a gung ho approach thanks to strong earnings

"The bond market doesn't seem to be worried about inflation but bond investors seem to be apprehensive about the economy," said John Kosar, director of research with Asbury Research in Chicago. "That's not a good sign. In general, the bond market is the one that tends to get it right."

Based on the article by By Paul R. La Monica