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Yield on US Treasury bonds rises to a maximum of 2 and a half years

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LONDON, March 14 (Reuters) – U.S. Treasury yields soared on Monday, hitting their highest since 2019, as accelerating inflation unsettled investors just days before the Federal Reserve probably started a cycle of interest rate hikes.

* The return on two-year notes advanced to 1.83%, its highest level in about two and a half years.

* At the start of trading in London, the yield on 10-year paper was below 2.106%, at the maximum of July 2019. In its last price, it climbed 8 basis points on the day.

* Yields gained 7-10 basis points across the bond curve as hopes for progress in Russia-Ukraine peace talks bolstered risk assets and dampened demand for safe-haven assets.

* In Europe, German and British debt yields rose sharply.

* Unrest over high inflation, exacerbated by Russia’s invasion of Ukraine, also helped explain the sell-off in bond markets.

* With inflation nearing 8% in the US, the war in Ukraine could fuel price pressures through rising energy costs, further disruption to supply chains, or even a reshuffling of trade and global governance that could lead to a persistent rise in prices.

* “The fear is that central banks don’t have what it takes (to quell inflation),” said Mizuho’s Colin Asher. “There are reasons to speed up their policy tightening: core inflation is at 6% and they are still buying assets. One could argue that this gradualist approach is what the market is worried about.”

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

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