Why rates could stay low for a while

Why rates could stay low for a while

It's the ultimate game of chicken.

Stocks keep hitting fresh records seemingly by the day. But bond yields, which typically rise with a recovering economy, have barely budged and continue to hover below 2.4 percent. So what gives?

"Until you start to see the global disinflationary environment reverse itself, you're going to be in a tight trading range for the 10-year," said Chad Morganlander, portfolio manager at Stifel Nicolaus' Washington Crossing Advisors. He expects the 10-year yield to stay within a range between 2.5 and 3.0 percent in 2015.

(Read: Treasurys boosted by fears about China, Europe)

U.S. rates are highercompared withmany European countries, he said. And inflation doesn't seem like it will be a problem in the near future, he added.


10-year yield

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United Kingdom






"We need to really start to see inflation expectations here in the United States start to really heat up and run hot for at least six months before you're going to see the 10-year [yield] move way higher," Morganlander said. "We don't think the Federal Reserve is going to raise interest rates any time soon."

Rates will hold steady for now and may even move down a little bit soon, according to the chart work of one highlyregarded technician.

"We're not expecting rates to go meaningfully higher," said Ari Wald, head of technical analysis at Oppenheimer & Co.

(Watch: Low rates not creating stock bubble: Fed's Powell)

The 2.4 percent level is acting as resistance on a chart of the 10-year yield, Wald said. "The falling 50-day moving average is also here," he added. "And this is all within a trend of lower lows and lower highs. So the trend points to continued lower rates."

Like Morganlander, Wald also notes U.S. yields are higher than other countries, particularly Germany's. "The relative attractiveness versus German bunds has actually increased because German bunds have fallen by a larger degree," Wald said. "Add it up, we think over the next 12months rates are probably sideways at best and in the near-term, I think yields start to tick lower again."

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