Blame Germany for low U.S. rates

The 10-year yield plunged Wednesday, falling below 2.4 percent. Often, low Treasury yields are taken as indication that inflation will remain low and that tough economic times may be ahead. But in this case, traders say that U.S. yields are merely following a global trend.

In Germany, which has the strongest economy in Europe and is one of the world's most important markets, yields on the 10-year government Bund have fallen below 0.9 percent. This continues the huge decline in German rates, which started 2014 near 2.0 percent.

For Erin Gibbs of S&P Capital IQ, U.S. 10-year yields are "fair." And while 2.4 percent might not sound like much, she points out that Treasurys "are just so much more attractive than everything else."

The European Central Bank kept its rates unchanged Thursday. However, given that the German economy has disappointed, and the ECB looks primed to embark on further easing measures, "There definitely is going to be a preference for the U.S. asset class, both in fixed income as well as in equities, for the next six months," she said.

Richard Ross of Auerbach Grayson agrees that U.S. yields are at a sensible level.

"The pricing seems to be just about right," he said.

After all, he sees no immediate reason why the long decline in bond yields, which accompanied the rally in bond prices, will come to an end.

"Interest rates, whether in the U.S. or in Europe, have been unable to mount any sort of advance for just about the last 20 years," Ross said. "And when you pull up the year-to-date chart, you can see just another key failure here recently."

Still, a move above the 2.4 percent level could potentially change his mind, as it would complete a bullish "reverse head-and-shoulders" pattern.

"It's very important that we hold this 2.40 level," because if not, "that would set us up for a retest of that moving average and that resistance up around 2.65."

For the full discussion on German and U.S. bonds, see the above video.

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