Treasury yields aren’t going much higher: Traders

Trading Nation: Bond yields set to rise?
Trading Nation: Bond yields set to rise?   

As stocks have staged a bit of a rebound over the past few sessions, bond yields have made their way higher as well. But investors shouldn't expect the bond market to offer conventionally attractive rates anytime soon, some market strategists warn.

After falling as low as 1.53 percent in panicky trading last Thursday, the 10-year Treasury yield rose back above 1.8 percent Wednesday. And according to Oppenheimer technical analyst Ari Wald, the next stop may well be the key level of 2 percent.

"Near term, we think that 2 percent is very important," since "in the second half of the year, that was the floor," Wald said Wednesday on CNBC's "Power Lunch."

In the sessions ahead, "I do think you get [to 2 percent], that the near-term momentum continues, but I think you're capped there," since the old floor will likely become the new ceiling.

Furthering his case is the fact that 2 percent actually looks like a "high level" compared to ultralow rates in Germany and Japan — so that 10-year Treasurys "start to look pretty attractive at 2 percent," said Wald.

Read MoreWhy gold isn't the hedge you think it is

Societe Generale macro strategist Larry McDonald is of a similar mind.

"On Thursday we had one of the greatest moments of capitulation on the buy side, in terms of people getting long bonds," McDonald said. As that sentiment unwinds, "we're likely to drift back up toward 2 percent in the short term."

He adds, however, that "after that, there will be a lot of global pressures dragging yields back down over the next couple of months."




About Trading Nation

  • Trading Nation will offer enthusiast traders insights from a group of "Trader Coaches," a collection of expert CNBC Contributors who are well-versed in the daily challenges of trading. Each "Trader Coach" will have a different area of expertise, and will share their unique perspective on the markets, allowing new insights to emerge from this collaboration. Trading Nation is not simply about finding that next trade; it's a forum where enthusiast traders can hear and compare investing ideas in order to build confidence in their trading decisions.

@TradingNation




Host

"Power Lunch" Co-Anchor




Contributors

TradingAnalysis.com founder

Senior Director, Société Générale

Managing Director, Head of Technical Analysis, Evercore ISI

David Seaburg

Managing Director Head of Equity Sales Trading, Cowen and Company