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Art Cashin: Bond bounce may signal better economy

Veteran trader Art Cashin said Thursday's rebound in the 10-year yield could indicate a stronger economy.

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"It would appear that the reversal in the bond market was above internal technicals. It had gotten a little overbought at the point," Cashin, director floor operations at the NYSE for UBS, said Friday on CNBC's "Squawk on the Street." "But there were also some very mild whiffs of inflation beginning to appear, and if you look there was strength in the TIPS bonds—the inflation-protected bonds."

The resulting lift of the stock market, he said, was based on signals that the Federal Reserve's efforts to reach 2 percent inflation might be working, and that the economy had "gotten past the stall speed."

Read MoreDeflation 'greatest hoax' as prices keep rising

Inflation increased 1.6 percent in April from a year ago, Reuters reported Friday morning, faster than many leaders of the Fed expected. Cashin said he would support inflation "up to 2 percent."

"The bond market is not always right," he said. "I think there's a thing going on here, up until yesterday—and it may resume again—and that is you've had a lot of people short the bond market, particularly the short end of the bond market from the front end all the way to the 10-year."

If Mario Draghi, president of the European Central Bank, does not do anything of significance next week, "then," Cashin said, "I think the market is going to have a severe reaction."

Read MoreArt Cashin: This could lead to 'currency wars'

—By CNBC.com staff.


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