Early in the year, bond guru Bill Gross warned clients that if the 10-year Treasury (U.S.:US10Y) yield jumped past 2.6 percent, bad things for the fixed income market would follow.
The benchmark government note surpassed that level briefly Thursday afternoon, raising questions about what's next for bonds.
"If 2.6 percent is broken on the upside ... a secular bear bond market has begun," Gross told investors in his monthly letter in January. "Watch the 2.6 percent level. Much more important than Dow 20,000. Much more important than $60-a-barrel oil. Much more important than dollar/euro parity at 1.00. It is the key to interest rate levels and perhaps stock prices in 2017."
Gross told CNBC "I think so" when asked if the 2.6 percent break automatically signaled a bear market.
"I've said, not predicting that it would exceed 2.6 percent but that if it did, it would be the signal of a longer-term secular bear market," he said on "Power Lunch. "For 30 years, interest rates have been coming down, lower highs and lower lows but we're at a point now in terms of a long-term trend line where 2.6 percent represents the point where an interest rate reversal should take place. If it doesn't, if 2.6 is broken and move to 3 percent, then that basically says that interest rates are headed higher on a longer-term basis."
Since his initial warning, Dow (Dow Jones Global Indexes: .DJI) 20,000 has been blown past, oil has backed well off its highs, and the dollar and the euro have yet to reach parity. Prior to this week, bond yields had been held more or less in check as the equity rally has continued.
However, this week has been tough for stocks, with the S&P 500 (^GSPC) losing around 1 percent.
In the meantime, bond yields have drifted higher and jumped shortly after 2 p.m. ET, finally pushing the 10-year over 2.6 percent for the first time since mid-December. The level was passed only briefly back then and really hasn't held above there since April 2014. The 10-year last traded at 2.597 percent.
Whether this represents a bond bear market is tough to tell, but the signs are building.
Hedge fund heavyweight David Tepper appeared Wednesday on CNBC and, when asked whether he was short bonds, said, " You bet your heinie ."
However, he did not seem to share Gross' view that trouble could be right around the corner.
"We've got a lot of room until we have to worry," Tepper said.
Several other fixed income experts also said they do not see anything particularly troubling about the yield rising above 2.6 percent. After all, Federal Reserve officials have given a clear indication that a quarter-point hike — or 25 basis points — is on the way next week.