Treasury Yields Keep Climbing as Investors Brace for Hotter Inflation

CNBC, Bloomberg, and Reuters contributed to this report.

US Treasury yields kept climbing on Monday, joining a wider global bond selloff as investors got more nervous about inflation flaring back up.

The move was sharpest at the long end. The 10-year Treasury note, the main benchmark for US borrowing costs, rose more than 2 basis points early in the session to 4.6173%, its highest level in 15 months. The 30-year yield, which tends to react more strongly to political and inflation risks, hit 5.1418%, a two-decade high after edging higher by 1 basis point. The 2-year yield, which tracks expectations for Federal Reserve policy, also moved up, to 4.1008%. Since yields and prices move in opposite directions, the selloff in bonds has been pushing borrowing costs higher across the board.

Last week already set the tone. The 10-year yield jumped 14 basis points, and the pressure has only spread since then. Markets are now wrestling with rising consumer prices, higher import costs, and a Fed leadership transition that is adding another layer of uncertainty. New chair Kevin Warsh is stepping into a mess that is getting harder to manage by the day.

The pain was not limited to the US German 10-year bund yields climbed more than 2 basis points to 3.1827%, while Japan’s 10-year government bond yield surged 13 basis points to 2.739%. In Britain, gilts were a little steadier, but they are still sitting at elevated levels. The 10-year Gilt yield was around 5.169%, and the 30-year was near 5.818%, even after a slight easing in early trading.

The backdrop is making central bankers sweat. With inflation risks rising and the fallout from the Middle East conflict still feeding into energy prices, they are being pulled in opposite directions. Raising rates too much could squeeze growth. Moving too slowly could let inflation regain momentum.

Oil is not helping. Brent crude climbed 1.8% to $111.16 a barrel, while West Texas Intermediate gained more than 2% to $107.56. That kind of move tends to seep into transport costs, business margins and, eventually, consumer prices.

In the UK, the pressure is even more political. Aberdeen’s Lizzie Galbraith said the energy shock, combined with domestic uncertainty around Prime Minister Keir Starmer, is putting an extra risk premium on gilts. Investors clearly want more stability before they are willing to buy long-dated debt with confidence.

The mood heading into the G7 finance ministers’ meeting in Paris is uneasy. Bond markets are sending a blunt message: inflation is not done yet, and the bill for that is showing up first in government debt.