Why a global ‘tug-of-war’ could drive the 10-year yield below 2%

The U.S. Treasury market as well as global bond markets are of particular moment to one portfolio manager, as it appears there are muddled messages about where interest rates are going globally.

The 10-year Treasury bond yield slid Friday before the market open to nearly 2.1 percent following the release of monthly U.S. employment data that missed expectations, raising concern about broader economic health.

While yields turned around and finished Friday higher, Chad Morganlander, portfolio manager at Washington Crossing Advisors, forecasts this benchmark rate could fall below 2 percent over the next four to six months. That level hasn't been seen since November.

"I think that there's a lot of confusion about where interest rates are going to go, not only on the short end of the yield curve but on the long end of the yield curve," Morganlander said Friday on CNBC's "Trading Nation," referring to bonds with varying maturities.

Economic growth domestically and globally will begin to "modestly decelerate," he said, which would lead to a depression in yields. Global rates are still historically low, he pointed out, and the European Central Bank will move "slower than investors think" going forward when it comes to normalizing its monetary policy.

"There's this tug-of-war happening between economics, as well as monetary policy, not only here in the U.S. but also across the globe. Take into consideration the European Central Bank, as well as the [Bank of Japan]; there's been an unprecedented amount of liquidity thrown at the credit markets and the sovereign debt markets over the course of the last 18 months," he said.

Furthermore, historically low interest rates in European nations such as Germany, as well as in Japan, are pushing U.S. yields down as well.

The 10-year Treasury yield was modestly higher on Friday afternoon, at 2.16 percent.

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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.

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