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US yields rise as investors expect Fed aggression against inflation

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By Karen Brettell

NEW YORK, March 14 (Reuters) – U.S. Treasury yields rose to a two-and-a-half-year high on Monday, two days ahead of the Federal Reserve’s expected first rate hike in three years. at a time when the central bank is looking for inflation that shows no signs of slowing down.

* Investors expect the US central bank to raise rates more aggressively this year, after data on Thursday showed annual inflation in February rose at the fastest pace in 40 years.

* The market “is focusing more on local fundamentals after last week’s CPI (consumer price) print and is targeting more and more rate hikes,” said Gennadiy Goldberg, an interest rate strategist at TD Securities in New York.

* American consumers express their estimate of strong inflation a year from now and three years from now, and consider that they expect to spend much more on food, gasoline and rent in the next 12 months, according to a survey released Monday by the Federal Reserve from New York.

* Fed fund futures traders expect the benchmark overnight rate to come in at 1.83% at their December meeting, down from 1.75% on Friday and compared to 0.08% true.

* Two-year yields, which are the most sensitive to rate hikes, jumped to 1,851%, the highest level since August 2019. Benchmark 10-year bond yields hit 2,144%, the highest point high since July 2019.

* The yield curve between 2-year and 10-year notes steepened 5 basis points to 29 basis points, after rising 19 basis points a week ago.

* Yields on 7-year notes, which are less liquid than other maturities, rose above those on 10-year notes, with that part of the yield curve being the most inverted since April 2020, at minus 2, 2 basis points.

* Investors have been trying to factor in a more aggressive Fed policy on geopolitical risks following Russia’s invasion of Ukraine.

(Reporting by Andrew Galbraith in Shanghai and Dhara Ranasinghe and Sujata Rao in London; Spanish editing by Carlos Serrano)

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