Even as US stocks powered up by QE3, the 10-year Treasury yield has nearly recouped the post-QE3 rise. The 10-year yield rose from 1.75% to as high as 1.899% Monday and recently has slipped back to 1.781%. "While investors have continued to drive equity prices higher, they don't seem to be convinced that they should abandon the safe-haven trade altogether, thus money has been flowing back into the Treasury market creating, in the process, almost a straddle scenario of investment," says Kevin Giddis, head of fixed income at Raymond James/Morgan Keegan. Giddis's advice for investors? "You might want to get used to a step forward, then a step back, when it comes to the economic recovery and the market's reaction to the news."
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