Montreal, Canada

Big mergers and acquisitions news helped propel global stock prices higher yesterday with triple-digit gains recorded by most global indices. Though rising merger volume is bullish for the market, it's not enough to justify the ongoing sense of euphoria gripping risky assets since March. At this point, the rally has gone too far, too fast.

I'd feel much better about the market if Treasury bond yields were rising, not declining. And the recent tumble in oil prices is not a good omen for global economic growth. The same is true for the Baltic Dry Index (BDI), which measures bulk cargo shipping rates. The BDI has plummeted since June.

Employment trends remain bearish, bank lending is scarce, consumption is still impaired and the only real recovery occurring anywhere is largely on Wall Street and in China.

Is the average man on the street really seeing an improvement since last spring? It's highly unlikely.

The real test for the economy, stock market and Treasury prices lies ahead when GDP figures are released for the third quarter (Q3).

I expect the economy to post a big number as the full force of fiscal spending works its magic combined with inventory draw-downs, cash-for-clunkers and a rise in domestic consumption. Historically, big declines in GDP have been followed by equally big recoveries. We should not underestimate Q3 GDP growth.

The stock markets' big rally since March has undoubtedly boosted investor confidence; it's very probable the economy rebounded swiftly over the last few months after falling off a cliff late last year. But will it be a sustainable rebound?

If Treasury bond prices don't decline following Q3 GDP news – and I'm assuming that report will be bullish – then we know the market doesn't believe a recovery is coming.

Still, despite a barrage of Treasury bond supply this year and fears of rapid credit creation by the Fed, the bond market has rallied since June. This defies conventional thinking because Treasury will issue several trillion dollars' worth of debt in fiscal 2009-2010 and that impending supply should be pushing rates higher, not lower.

Someone, somewhere is buying a truckload of Treasury bonds. And it's not just the Chinese and PIMCO.