Bill Gross is wrong about bonds: Traders

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.


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 CNBC and 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