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10-year Treasury yield rockets above 3.39% in biggest move since March 2020

Short-term rates jumped on Monday as the 2-year and 10-year Treasury yield curve briefly inverted for the first time since early April.

The measure, which is closely monitored by traders, is seen by many as an indicator of a recession.

The gap between the 2-year and 10-year yields briefly dipped to as low as minus 0.02 basis points on Monday. It comes after Friday’s hotter-than-expected inflation reading stoked concerns about an aggressive rate hiking strategy by the Federal Reserve.

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The 2-year rate was last up 16 basis points at 3.208%, while the benchmark 10-year rate traded roughly 13 basis points higher at 3.284%. Yields move opposite to prices, 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.

Treasurys

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 contributed to this report.

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