Trading Nation

Bill Gross is wrong about bonds: Traders

Trading Nation: 2.6% the key level?

A secular bear bond market will begin should the 10-year Treasury yield break above 2.6 percent this year, Bill Gross of Janus Capital wrote in a note published Tuesday.

But that key level does not sit well with two traders who said Tuesday they have different numbers on their radar.

From a technical perspective, the more important levels to watch on the 10-year yield are 2.75 to 3 percent, according to Craig Johnson, senior technical research analyst at Piper Jaffray.

"That's the downtrend resistance line off the 1981 highs," Johnson said on CNBC's "Power Lunch," adding that a reversal above 2.75 percent would usher in shift in asset allocation from fixed income to equities.

The 10-year yield, at 2.378 percent by Tuesday's close, will likely hit the range of 2.75 to 3 percent in the second half of 2017, Johnson forecast. A secular bull market in equities will work until the 10-year bond yield reaches 5 percent.

For Boris Schlossberg, managing director of foreign exchange at BK Asset Management, the 2.6 percent mark isn't very significant.

"I think the only number that really matters is the 3 percent number, but it's the 3 percent of wage growth," Schlossberg said on CNBC's "Power Lunch."

"If we see wage growth of 3 percent or better this year, then all other numbers are going to come in line," Schlossberg said.

Gross wrote in his report — in which he said this forecast was the only one he would make on the 10-year Treasury for 2017 — that the yield hitting 2.6 percent is more important than reaching 20,000 on the Dow, WTI crude oil touching $60 per barrel, or the U.S. dollar and the euro reaching parity. Yields, he said, will inevitably move higher during Trump's first year in office.