In his latest column for MarketWatch, Mark Hulbert notes that a “dramatic reversal” is taking place in the bond market — and says it’s a reversal that could signal good things for the economy and the stock market.

The yield spread between 10-year U.S. Treasuries and 10-year triple-A-rated municipal bonds has fallen significantly in the past month, Hulbert says. A month ago, those Treasuries were yielding 2.3% versus 3.53% for the munis. Given that interest from munis is not subject to federal taxes, the munis usually yield less than Treasuries, Hulbert says, adding that the reversal from that norm had occurred as “panicked investors have dumped munis, along with almost all other securities besides Treasuries, and run for the cover of safety provided by Uncle Sam.”

But in the past month, the yield on 10-year Treasuries has risen to 2.88%, while the yield on the highly rated munis has fallen to 3.17%.

The situation is thus still unusual and reflects concern about municipal bonds, but the major decline in the spread between the two rates means things may be moving in the right direction. “It suggests that investors are beginning to at least tip toe away from Treasuries and, in the process, incur more credit risk than before,” Hulbert writes. “If this trend continues, it would signal the markets’ return to its ‘normal’ function of pricing various securities according to their intrinsic worth, in which it properly discriminates between securities of higher and lower quality.”

Hulbert, whose Hulbert Financial Digest tracks the performance of investment newsletters, says that the top-ranked newsletters he follows are indeed showing a shift away from Treasuries and into bond funds that carry more risk. He lists several bond funds that these successful newsletters are currently high on, including: Vanguard GNMA (VFIIX); Fidelity High Income (SPHIX), and PIMCO Total Return (PTTDX).