The 10-year yield passes 3 percent, but one trader sees it rising to near 4 percent

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Trading Nation: The rate debate

The 10-year yield barreled through 3 percent on Tuesday, its highest level since January 2014. One trader has his sights on a far bolder call nearly 100 basis points north of that.

"I am bullish on the 10-year yield," Frank Cappelleri, senior equity trader at Instinet, said Monday on CNBC's "Trading Nation."

Cappelleri is so bullish on yields that he has one of the highest targets on the Street. He says it's possible the 10-year yield will reach 3.9 percent, a level not seen since April 2010.

"What happened last fall when the 10-year yield held that 2 percent support level, what that did was create a higher low and create this bottoming process that we saw it break out through at the beginning of the year through 2.6 percent," he said.

Bond yields have been on an upward march this year as higher inflation expectations spurred predictions of a more hawkish Federal Reserve. The yield on 10-year Treasurys pushed past 2.6 percent in mid-January.

"A classic measured move from the pattern gets us to 3.9 percent," said Cappelleri. That kind of a move would coincide with resistance levels seen in 2008, 2009 and 2010, he added.

He spoke as the 10-year yield was flirting with 3 percent.

Gina Sanchez, CEO of Chantico Global, offered a counterargument.

"You'd have to have a lot of inflation actually occur, not just fear of inflation, in order to get up to levels like that. I think 3.9 [percent] might be considered the highest it could possibly go," Sanchez said Monday on "Trading Nation."

Higher inflation this year should push the Fed to raise the federal funds rate at a faster pace, which will have knock-on effect on interest rates and the bond market.

"If you look at the Fed, most people are expecting at least three rates hikes. A bull case is four rate hikes. That would be an incredibly steep curve and I don't think that that's really possible," said Sanchez.

The markets are pricing in no change to Fed policy when the Federal Open Market Committee meets in May, but traders anticipate another hike at the June meeting, according to CME Group fed funds futures.