For better or for worse, the US Treasury comes to market this week with $118b worth of 2′s, 5′s and 7 year maturities. For better in that higher yields will bring out the buyers, for worse, a light week and the scare of higher yields will keep the buyer’s home, thus sending yields even higher. This comes as the yield spread between 2′s and 10′s is back at a record high of 285 bps as the bond market has begun the tightening process for the Fed and also adjusts to the ever deteriorating financials of the US government as 5 yr CDS trade near 6 month highs. The 2010 action in the stock market will be predominantly determined not by earnings (as the ’09 rally has priced in much of the rebound) but by interest rates. The 10 yr note yield today at 3.85% is matching the highest level since June. But for now, stocks continue their path of least resistance as the focus is on the improving global economic picture.