U.S. Treasury yields jump 18 - month high as energy prices surge

U.S. Treasury yields jump 18 - month high as energy prices surge

SINGAPORE, Oct 12 Reuters - Two year Treasury yields leapt to a more than 18 -month high on Tuesday as investors sold U.S. debt, reckoning that surging energy prices would fuel inflation and add to pressure on the Federal Reserve to increase interest rates

Prices for gas, coal, oil and other commodities have soared in recent weeks and there is growing evidence that costs are flowing through supply chains.

At the reprise of trade in South Asia, two year yields rose 3.6 basis points to 0.3560% after the Columbus Day holiday in the United States and loosened a little bit to 0.3497%.

Which extended the sell-off in two-year Treasury to a sixth consecutive session. The yield was highest since March 2020, when investors sold bonds in the days after the Fed dropped its benchmark rate to near zero.

It's part of a phenomenon we are seeing globally with fears about inflation piking again on the back of higher energy prices said Shane Oliver, chief economist at AMP Capital in Sydney.

There is expectation that maybe that will bring forward Fed tightening, he said, while adding that if he personally cannot lead to a rate hike, he says the Fed would not be in any hurry.

Five-year yields rose nearly 4 bps to 1.095% in Asia, their highest since late February 2020 and benchmark 10-year yields touched a four-month high of 1.6310%.

The 10-year yield has climbed about 30 basis points in three weeks, with even weaker than expected U.S. labor data last week insufficient to staunch the selloff or shake markets' belief that the Fed is on track to begin rate rises next year.

Bonds are also under pressure globally with 10 - year - bond yields up 20 bps in three weeks, 10 - year Indian government bond yields more than 50 bps over the same period and even 10 years-old Japanese yields rising 5.5 bps.