Treasury yields aren’t going much higher: Traders

As stocks have staged a bit of a rebound over the past few sessions, bond yields have made their way higher as well. But investors shouldn't expect the bond market to offer conventionally attractive rates anytime soon, some market strategists warn.

After falling as low as 1.53 percent in panicky trading last Thursday, the 10-year Treasury yield rose back above 1.8 percent Wednesday. And according to Oppenheimer technical analyst Ari Wald, the next stop may well be the key level of 2 percent.

"Near term, we think that 2 percent is very important," since "in the second half of the year, that was the floor," Wald said Wednesday on CNBC's "Power Lunch."

In the sessions ahead, "I do think you get [to 2 percent], that the near-term momentum continues, but I think you're capped there," since the old floor will likely become the new ceiling.

Furthering his case is the fact that 2 percent actually looks like a "high level" compared to ultralow rates in Germany and Japan — so that 10-year Treasurys "start to look pretty attractive at 2 percent," said Wald.

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Societe Generale macro strategist Larry McDonald is of a similar mind.

"On Thursday we had one of the greatest moments of capitulation on the buy side, in terms of people getting long bonds," McDonald said. As that sentiment unwinds, "we're likely to drift back up toward 2 percent in the short term."

He adds, however, that "after that, there will be a lot of global pressures dragging yields back down over the next couple of months."


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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

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