A rise in U.S. bond yields could be sending a signal about stocks.

The yield on the benchmark 10-year Treasury rose to 1.13% Monday, that’s its highest level since March 2020. The 10-year is widely watched, since it influences mortgages and other lending rates. Bond prices move in the opposite direction of their yields.

“I think the bond market's clearly indicating that it's expecting higher growth and potentially more inflation down the road,” Kathy Jones, chief fixed income strategist at Charles Schwab tells Yahoo Finance Live.

Jones says rising Treasury yields could take some of the air out of growth stocks — especially Big Tech — which led the stock market to record highs last year.

“We actually moved from Overweight to Neutral [on tech stocks] a couple of months ago,” says Jones. “Mainly because valuations were so stretched and we thought that there was room for a correction.”

While she is positive on tech stocks in the long-term, Jones expects to see a near-term pullback and a continuation of a rotation into value names and cyclical stocks on prospects that COVID-19 vaccinations will lead to an improving economy.

The 10-year yield climbed above the psychologically important 1% level last week after Democrats took control of Congress, clinching two Georgia Senate seats.

Yields also rallied after the U.S. Department of Labor reported job losses in December for the first time in seven months. That worse-than-expected jobs report may pressure Congress to introduce even more fiscal stimulus measures, which could mean more Treasury issuance to pay for it.

Jones believes Treasury yields will continue to trend higher this year.

“I don't think going back below 1% is a risk,” says Jones. “We could get, at any point, some sort of flight to safety if there's another big event that shakes up the markets. But in general we're looking for 1.6% on the 10-year.

Much above that, I think we'd need to see unemployment fall much faster and that doesn't seem likely. So, I don't think we're getting to 2% this year, but I think, you know, 1.5%, 1.6% is a reasonable expectation.”

Alexis Christoforous is an anchor and reporter for Yahoo Finance. Follow her on Twitter @AlexisTVNews.

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