Traders see warning signs in the US bond market

As bond yields tumble, some traders say that the flight to safety may be sending a rather ominous signal for the global economy.

The U.S. 10-year Treasury note yield fell to its lowest level since April 2015 on Tuesday as stocks dropped 2 percent. According to Boris Schlossberg of BK Asset Management, the move into bonds is in response to a weakening economy on the cusp of a potential recession.

"The bond market is flashing yellow for caution right now," Schlossberg said Tuesday on CNBC's "Trading Nation." "I think the bond traders are telling you there is no growth going forward and the Fed is far too optimistic in its projections as it stands right now."

Falling yields are typically seen as a sign of diminished confidence in economic growth, as it shows that investors are less excited about the potential returns in other assets, and also implies an expectation that inflation will remain muted.

Read MoreStrategist: Forget the dips—buy the craters!

While Schlossberg said it's too soon to determine whether the U.S. economy will go into a recession, he noted that at the very least, bond traders are anticipating a "major slowdown."

"Investors have nowhere else to place their bets. They're not optimistic about growth," he said.

As central banks across the world keep interest rates low, Phillip Streible of RJO Futures said investors have been piling into U.S. bonds. The best bet for finding yield, he said, continues to be long-term bonds such as the 10-year Treasury note and the 30-year Treasury bond.

"It seems like investors, especially today, were aggressively going after those yields," Streible said Tuesday on "Trading Nation." "We've seen a global switch from country to country, going after the highest-yielding [bonds] and the U.S. market, although we've got our problems, it's the safest one out of the bunch."

Want to be a part of the Trading Nation? If you'd like to call into our live Wednesday show, email your name, number, and a question to


Trades to Watch

Trader Bios


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.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

Read more