Is the dollar calling the bond market’s bluff?

The bond market has been making moves that the U.S. dollar just isn't buying.

On Monday, short-term bond yields hit their highest levels since January. This reflects slightly increased expectations on how willing the Federal Reserve will be to raise its interest rate targets over the course of the year.

But Boris Schlossberg of BK Asset Management sees one big problem with the recent move higher.

"Something interesting is happening right now. Yes, yields on the short-term bonds are going up, but the currency market is totally not buying it. The dollar is not rising," Schlossberg said Monday on CNBC's "Trading Nation."

Schlossberg said given the rise in short-term yields, the dollar should be rising against the yen and the euro. Expectations of increasing short-term rates tend to boost the dollar against other currencies, as it increases the yield that traders can hope to earn by holding dollars.

The unusual divergence "tells me that maybe this is just a fake-out rally in yields in the near-term ... and the market is simply getting ahead of itself," he said.

Marc Chandler, head of currency strategy at Brown Brothers Harriman, said that while U.S. bond yield premiums over other countries have reached multiyear highs, the dollar has been constrained by investor caution.

"That interest rate differential is the underlying trend, but under that trend is noise. It hasn't convinced everybody that everything is good again," Chandler told CNBC in a phone interview Monday.

He said investors are still looking for a hedge or insurance for lingering market uncertainty, and one strategy is to be long the Japanese yen. He also likened the situation to the continued gains in safe-haven gold, even as U.S. stocks have bounced greatly from the year's steep plunge.

Chandler said weakness in global markets has made the U.S. market more attractive by comparison. However, technician Ari Wald of Oppenheimer believes low interest rates in Germany and Japan will weigh on long-term bond yields in the U.S., even as short-term yields rise.

"We think it's going to remain anchored by global growth concerns. If you look at the trends between the two you can really see a notable difference," Wald said Monday.

Unlike the 2-year Treasury yield, Wald noted that the 10-year yield has fallen below its 200-day moving average, a technically important measure of asset movements.

Schlossberg agreed that long-term bond yields in the U.S. will have trouble fighting off pressure from weak global economies and low international bond yields.

"It's really hard to have U.S. yields go up when the rest of the world is trying to drag it down," he said. "We're in uncharted territories. I don't think anybody can really forecast how this whole thing unwinds."

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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.

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