Our proprietary Treasury Note Yield Model is signaling that bond yields, which have climbed 60 basis points in recent months, are still too low based on fundamentals. Our model discounts factors such as current yields, GDP growth and long-term inflation, as well as stock prices and earnings. We smooth trends out over a five-year period, in order to avoid short-term momentum swings. Our current 10-year T-bond fair value yield is 3.0%. The normal valuation range has a floor of 1.75% and a ceiling of 4.25%. The current 10-year bond yield is around 1.3%, below the low end of the fundamental range and well below fair value. From an asset-allocation standpoint, we think bonds remain fully valued compared to stocks and recommend that long-term investors modestly favor equity securities in their diversified portfolios. We typically break the fixed-income component of a portfolio into four areas: Core, such as the industry benchmark ETF AGG or Treasuries; Inflation-Indexed; Opportunistic, such as securitized debt, corporate debt, high-yield or floating bonds or preferreds; and Cash. We currently favor the Core and Opportunistic segments, and have been adding to Inflation-Indexed. On duration, we recommend the intermediate-term.