Short-term US government bonds hit with fresh bout of selling

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Shorter-dated US government bonds dropped in price on Monday in the latest sign of how investors are expecting the Federal Reserve to aggressively tighten monetary policy in an attempt to rein in inflation.

The yield on the two-year Treasury note, which moves inversely to its price, rose 0.11 percentage points in early European trading to 2.4 per cent, leaving it up more than 1.6 percentage points since the end of last year.

Short-term bonds have sold off more vigorously this year than ones at the longer end of the spectrum as expectations for a series of Fed rate rises in coming months weigh on the longer-term economic growth forecast.

In a sign of those concerns, the five-year Treasury yield on Monday rose above the 30-year yield for the first time since 2006. A so-called yield-curve inversion of this nature reflects concerns that the Fed’s attempt to battle inflation could over time depress growth or even cause a recession.

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