2-year Treasury rate hits highest level since 2007 as traders fret over surging inflation

U.S. Treasury yields surged Monday morning, led by short-term rates, as traders reacted to hotter-than-expected inflation data last week and contemplated a possible recession.

The 2-year rate jumped more than 10 basis points to 3.1535%, reaching its highest level since 2007. The benchmark 10-year Treasury yield also rose, last trading at about 3.1762%, with the two edging closer to an inversion — which can often signal a recession. Yields move opposite to the price, and a basis point is equal to 0.01%.


Short-term rates have moved more in the last few days because of their higher sensitivity to Federal Reserve rate hikes, flattening the widely watched yield curve.

A highly anticipated Federal Reserve meeting comes this week, with the central bank expected to announce at least a half-point rate hike on Wednesday. The Fed has already raised rates twice this year, including a 50-basis-point (0.5 percentage point) increase in May in an effort to stave off the recent inflation surge.

Last week, the U.S. consumer price index, a closely watched inflation gauge, rose by 8.6% in May on a year-over-year basis, its fastest increase since 1981, the Bureau of Labor Statistics reported Friday. Economists polled by Dow Jones expected a gain of 8.3%. The so-called core CPI, which strips out volatile food and energy prices, rose 6%.

Meanwhile, the University of Michigan consumer sentiment reading fell to a record low, appearing to accelerate the selling in bonds at the end of last week.

There are no major economic data releases due Monday.

— CNBC’s Jesse Pound and Sam Meredith contributed reporting.

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