After a very long wait, long-term Treasury bond yields have begun to reflect a better outlook for the U.S. economy, a report from an economic research group said Tuesday.

It also reflects the prospect that the next move in the federal funds rate will be up, the Conference Board said in its latest report.

The forecast showed a rise in short-term interest rates by 50 basis points in the second half of this year.

Manufacturing production is rising at about a 2 percent annual rate while no defense capital goods orders, a key investment indicator, have risen 20 percent in real terms since January.

Much of the rest of the gain is in machinery orders, it added. Although the pickup in orders is fairly broad-based, high-tech orders are somewhat lagging.

High-tech orders, which should recover in the second quarter, are so closely related to the overall level of investment that it would be surprising if this sector didn't begin to rebound soon as well.

"The picture is a little less encouraging on the housing front," said Gail D. Fosler, executive vice president and chief economist of the Conference Board.

"But progress is underway. Demand is slowly coming back to the market. Mortgage applications are up about 17 percent since the low point last August," she added.