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Treasury yields aren’t going much higher: Traders

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.

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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."

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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Brian Sullivan

Brian Sullivan is co-anchor of CNBC's "Power Lunch" (M-F,1PM-3PM ET), one of the network's longest running programs, as well as the host of the daily investing program "Trading Nation." He is also a frequent guest on MSNBC's "Morning Joe" and other NBC properties.

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