The world has largely focused on the debt crisis in Greece and China's stock crash, but interest rate moves in the United States and Germany are among the most fascinating developments in the market, James Paulsen, Wells Capital Management chief investment strategist, said Monday.
Paulsen said he believes the Federal Reserve will begin raising interest rates soon and the 10-year Treasury yield will approach 3 percent, in which case, it may not be "clear sailing" for markets. Late morning on Monday, it was at 2.43 percent.
"They have come right back up to the highs they were at before Greece turmoil started to accelerate," he told CNBC's "Squawk on the Street." "Ultimately this is going to come back to when rates are going to start to rise, and we'll have to wait and see how Wall Street handles that."
U.S. Treasury prices fell Monday, pushing yields higher, after the bailout deal between Greece and its creditors dented the appeal of safe-haven bonds. Safe-haven bonds, which have benefited from the Greek crisis, sold off in both Europe and the U.S.
The stock market is still vulnerable as sentiment remains too calm and valuations too high ahead of rate tightening, but investors keeping buying the dips, he added.
"There's a lot of money that shows up on every dip," he said. "I think that says something about how calm and confident people have become about future here, maybe for the first time in this recovery."
Strategist Peter Boockvar called the jump in bond yields to nearly 2.5 percent the second most important story of the day after the Greek debt deal.
The move is further evidence the Federal Reserve is losing control of the yield curve by putting off a long-anticipated rise in interest rates, Boockvar told CNBC's "Squawk Box."
The Federal Reserve influences short- and long-term rates by adjusting its fed funds rate, the rate depository institutions charge one another to transfer funds held by the U.S. central bank.
If the Fed does not raise interest rates in September, the market will continue to drive long-term rates higher, said Boockvar, chief market analyst at The Lindsey Group. The central bank can regain control of rates by hiking its benchmark at its next Federal Open Market Committee meeting, he added.
"Either way we're in a rising interest rate environment. It will be slow. It will be methodical. It will take its time, but rates now are moving higher. Its just dependent on which end area the curve its going to happen," he said.
Also Monday, the euro traded lower against the dollar. With the Greece issue seemingly settled, investors are looking at old themes of interest rate divergences, which should favor the dollar in the long term, said Alan Ruskin, Deutsche Bank's global head of foreign exchange strategy.
"Of course we need the Fed to play the game, really in a way, because the story of earlier this year was all about the ECB, a little bit about Greece. Now it needs to be about the Federal Reserve," he told "Squawk Box."
—CNBC's Dhara Ranasinghe contributed to this story.