US Treasury bonds tumbled on Wednesday following an unexpected surge in inflation data. The stronger-than-anticipated inflation figures led traders to increase their bets on a Federal Reserve interest rate hike later this month and into next year.
The sell-off pushed yields higher across various maturities. The two-year Treasury note, which is highly sensitive to Fed policy changes, saw its yield rise as much as 16 basis points to 4.95%. The five-year yield also climbed to its highest level since 2007.
The dollar strengthened significantly, reaching its highest point of the year. This move underscores the market's reaction to the heightened expectations of tighter monetary policy from the Federal Reserve.