Global bonds have had a wild month with yields gyrating as investors reassessed their expectations for the path of rate hikes as inflation quickens. The Treasury market has seen unusually large price swings as liquidity dried up, by one measure to the worst since peak investor pandemic fears in March 2020.

“Investors and Fed policy makers are still unsure as to whether elevated inflation will be transitory or not,” said Kenta Inoue, a senior market economist at Mitsubishi UFJ Morgan Stanley Securities Ltd. in Tokyo. As such, “we’re likely to see bigger market volatility.”

U.S. Treasury Market Is Most Treacherous Since Pandemic’s Onset

Five-year yields climbed as much as five basis points to 1.26%, the highest since February 2020. Benchmark 10-year yields climbed two basis points to 1.57%, up from just 1.41% on Nov. 9. The extra yield on 30-year bonds over five-year notes shrank two basis points to 64 basis points.

Yield-Curve Collapse Show Fear Rate Hikes Will Choke Off Growth

Traders are awaiting University of Michigan survey results Friday that is expected to show consumer expectations of inflation in the coming year climbed to a fresh 13-year high. Overnight-indexed swaps suggest the Fed may raise rates as soon as July next year.

“Inflation is expected to remain elevated,” Naokazu Koshimizu, a senior rates strategist at Nomura Securities Co. in Tokyo, wrote in a note. “As such, expectations of earlier Fed rate hikes will continue to exert bear-flattening pressures” on the Treasury curve.