Treasury yields reach highest since 2007; Liquidity issues in Treasuries; Investors demand higher compensation for US government debts and elsewhere.

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Treasury Yields Reach Highest Since 2007 Amid Elevated Rate Fears: Rising Real Yields Reflect Firmer Economy and Higher Deficits; 10-Year Yield Surpasses 4.34%, Marking Highest Level Since Financial Crisis

The US bond-market selloff resumed Monday, driving 10-year yields to a 16-year high, as the persistently resilient economy has investors positioning for interest rates to remain elevated even after the Federal Reserve winds up its hikes.

The moves pushed up yields on typical Treasuries as well as those that provide extra payouts to cover inflation, signaling that investors are bracing for the risk that monetary policy will remain elevated.

The yield on 10-year inflation-protected Treasuries on Monday pushed over 2% for the first time since 2009, extending its ascent from year-to-date lows near 1%. Not long after, the yield on 10-year Treasuries without that protection surpassed October’s peak, climbing as much as 9 basis points to 4.35%, a level last seen in late 2007.

The jump extends the major shift that has raced through the bond market over the past two weeks as the odds of a recession recede and large federal budget deficits increase the supply of Treasury debt. That’s driven investors to sharply push up rates on longer-term debt, which had tumbled deeply below short-term ones on fears that the economy was poised for a contraction.

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