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Over the past year, both Treasury yields and stocks have risen significantly, and therein lie some important messages. One, that the Fed's QE program has totally failed to lower Treasury yields; yields are up despite the Fed's monthly purchases of $85 billion of Treasuries and MBS (MBS yields are actually up much more than Treasury yields since the Fed started its current QE program). Two, that the Fed was never able to control or artificially lower Treasury yields -- the market controls the level of Treasury yields. Three, that the Fed never did distort or artificially depress yields, and never did artificially "stimulate" the economy. Four, that rising interest rates are not bad for stocks. Five, that interest rates and stocks are rising because the underlying economic fundamentals are improving -- even though this remains the most miserable and weakest recovery in U.S. history.

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It's also very important to note the message of TIPS. Real yields on TIPS have risen a bit more than nominal yields on Treasuries, which means that the market's inflation expectations have declined a bit. That's another way of saying that the rise in Treasury yields has been dominated by a rise in real yields, not by a rise in inflation or inflation expectations. Higher real yields confirm the message of stocks: What has been happening over the past year is an improvement in the economic fundamentals. Even though (I repeat) this remains the most miserable and weakest recovery in history.

Source: The Message Of Rising Yields Is Very Good