U.S. Rates have risen the most since 1987

On Monday, Treasury rates jumped the most in two days in decades, rattling global assets in one of the clearest indicators yet that the age of easy money is coming to an end. Even just a few days ago, global markets soared through milestones that appeared impossible. Three-year US Treasury yields rose, finishing the largest two-day increase since 1987. The S&P 500 entered a bear market after losing more than 20% from its January high. The gap between Italian and German benchmark rates, a major risk indicator in the eurozone, has widened to its biggest level since May 2020 and a measure of the currency hit its greatest level since the coronavirus pandemic began.

It all started with worse-than-expected US inflation data last week, which highlighted the Federal Reserve’s stark decision between fighting stubborn pricing pressures with aggressive interest-rate hikes or crashing the economy. This gained added significance on Monday with reports that the Federal Reserve could hike interest rates by 75 basis points as soon as this week, causing a global rebalancing from Sydney to New York.

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