A closely watched signal of recession risk in Treasury markets on Wednesday hit its most extreme level in more than 20 years, as hotter than expected inflation data fuelled investor bets that the Federal Reserve will aggressively raise interest rates.
The yield on the two-year Treasury note, which is particularly sensitive to short-term rate expectations, rose 0.09 percentage points to 3.13 per cent after data showed the annual rate of US consumer price inflation hit 9.1 per cent last month. Yields rise when prices fall.
At the same time, the yield on the benchmark 10-year note fell 0.05 percentage points to 2.91 per cent. The two-year yield has been higher than the 10-year yield since last week, known as an inverted yield curve, a phenomenon that has preceded every recession for the past 50 years.