The yield on the benchmark 10-year US Treasury isn’t far from 3%. Rates hit 3% in April for the first time since 2014 before eventually edging lower. Now yields are climbing again, but that hasn’t sent shudders through investors in stocks. The Dow was up more than 200 points Tuesday, and the tech-heavy Nasdaq hit an all-time high and closed in on 8,000.
The spike in yields reflects a healthy economy. Dow components Verizon () and United Technologies ( )as well as Google owner Alphabet ( ) and drug giant Eli Lilly ( ) all reported strong earnings in the past few days.
Bond yields should move higher if the economy is in good shape, especially if the Fed is hiking rates to keep inflation in check. And as the 10-year yield moves up, something called the yield curve is starting to widen again. That’s a good thing, too.
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The yield curve is the difference — or spread — between long-term and short-term rates, typically the 10-year and 2-year Treasuries. The spread had been narrowing, a phenomenon known as a flattening yield curve