SINGAPORE (Reuters – The two-year Treasuries were at their lowest point in over three years, and the longer curve is poised for its worst flattening since a decade. This happened as traders wait for the Fed’s rate hike in the middle of 2022.

After zooming up to a near 20-month high at 0.5670%, the two-year yields in Asia rose by 1.6 basis points to 0.5069%. This month they are at 22.5 bps, their sharpest increase in one-month since January 2018.

The long-end yields have plummeted because of investors’ belief that rising inflation will lead to smaller but faster rate rises.

The yields that fall as prices rise are steady at the short end, but a tiny drop in the 30-year yield to 2.05% kept it under the 20th year. This is an indication of how flat and flat the curve back is.

Carol Kong, strategist at Commonwealth Bank of Australia (OTC) in Sydney said that the flattening of bond curves suggests that bond market participants worry about a rapid monetary tightening threatening global economic growth.

In this month’s sharpest contraction since 2011, the gap between 30-year and 10-year yields shrank by over 15 bps. The Asian session saw a rise in benchmark 10-year yields of 1.5996% to about 2 bps.

On Friday, the Federal Reserve’s latest preferred inflation measure will be published at 1230 GMT. This print is anticipated to show an increase in annual price rise.

Market inflation gauges declined a bit on Thursday. They remain high and traders expect the Fed to reduce asset purchases next week.

Fed Funds Futures projected a 75% probability of a June rate rise on Friday. However, the Fed’s asset-purchase taper could be ending in June.

October was also a tough month for bond markets globally. European yields continued rising despite attempts by the European Central Bank, (ECB), to reduce concern over rate increases.

Analysts at NatWest Markets wrote to clients that “it doesn’t seem like the dust has settled upon the Bank of Canada & ECB over the past two days and next week will bring the RBA and Fed.”

“No rest for rate weary,” at least until all the major policy meetings and next Friday’s report (nonfarm payrolls), are our goals.