This central bank may be calling bond yields for now

Leslie Shaffer | Writer for
Roman Borodaev | iStock/360 | Getty Images

Market-watchers are parsing the Federal Reserve's every word for clues about where bond yields are headed, but the European Central Bank (ECB) may be in the driver's seat.

"Monetary policy development in the euro zone remains a critical factor in projecting the forward path of global long-term bond yields, especially since quantitative easing appears forthcoming," DBS said in a note Wednesday. It noted that global 10-year government bond yields have largely trended downward this year, with the biggest declines coming from euro zone economies.

Read More Contrast between US and Europe highlights Jackson Hole

"Even as the market expects U.S. [interest rate] hikes to draw closer, the decline in 10-year yields across the developed world has dragged down 10-year Treasury yields," it said.

ECB's Draghi will act in September: Strategist
ECB's Draghi will act in September: Strategist

The U.S. stock markets rallied to record highs this week, but while that would traditionally signal an exit from safe-haven assets such as Treasurys, yields barely budged -- even as Fed chief Janet Yellen made slightly more hawkish comments at the Jackson Hole meeting of central bankers last week.

Read More Are risky European bonds in a bubble?

But bond yields, which move inversely to prices, in the euro zone have continued to fall since ECB President Mario Draghi said Friday that the central bank is considering additional tools if inflation falls further, suggesting an asset-purchase program could be in the offing.

U.S. 10-year Treasury yields were around 2.39 percent in Asian trade Wednesday, down from around 3.0 percent at the beginning of the year. The was around 0.94 percent, tapping its lowest in at least 200 years, if not a record low, down from around 1.94 percent at the beginning of the year. On the periphery, also may have tapped record lows, yielding around 2.19 percent, down from around 3.90 percent at the beginning of the year.

Read More Here's why Treasury yields will keep on falling

"If long-term yields in the euro zone stay low for an extended period, long-term yields across other markets are going to be lower than they otherwise would have been," DBS said.

Others have also noted that lower euro zone yields are pressuring the 10-year Treasury.

Has Yellen opened the door to a rate hike?
Has Yellen opened the door to a rate hike?

"If you're faced with the prospect of buying bunds or U.S. Treasurys, of course you look at Treasurys," said Hans Goetti, head of investment for Asia at Banque Internationale a Luxembourg.

Read MoreYields are sending a disturbing message: Bond pro

"If long-term rates everywhere in the world are low, then U.S. Treasurys have a yield advantage," he said. "You hardly get any real yield, but people are willing to buy because on a relative basis, U.S. Treasurys are more attractive versus bunds and JGBs (Japanese government bonds)."

To be sure, not everyone thinks declines in benchmark bonds are caused by a central bank daisy chain.

Read More Pamplona hits Europe's bond market! Bulls send yields to centuries-old lows

"They're falling for very different reasons," said Andrew Freris, CEO at Ecognosis Advisory, an economic and market advisory service.

While euro zone bond yields have come down significantly, "they have been falling on relief, the absence of an obvious crisis," he said. "But in the U.S., they have been falling because people still consider the U.S. dollar a refuge from uncertainty."

—By CNBC.Com's Leslie Shaffer; Follow her on Twitter @LeslieShaffer1