2-year Treasury rate surges to highest level since 2008 on hotter-than-expected inflation report

Short-term U.S. Treasury yields popped Friday, after the release of hotter-than-expected inflation data raised concern over a possible recession.

The 2-year rate jumped more than 8 basis points to trade above 2.9%. The benchmark 10-year Treasury yield briefly rose before giving up those gains, last trading at about 3.03%. Short-term rates moved more due to their higher sensitivity to Federal Reserve rate hikes.

U.S. consumer price index data for May is scheduled to be released at around 8:30 a.m. ET, with investors waiting to see how the reading could shape the Federal Reserve’s rate-hiking strategy and whether decades-high inflation peaked in March.

CPI, a broad-based measure of prices for goods and services, rose to 8.3% in April, reflecting a modest decrease from March’s peak of 8.5% but still close to the highest level since the summer of 1982.

The Fed started raising rates in March and implemented a 50-basis-point hike in May, its largest in 22 years, with the Federal Open Market Committee meeting minutes pointing to further aggressive increases ahead — particularly if the forthcoming CPI reading confirms elevated inflation levels.

To be sure, the White House has acknowledged that it expects to see an uptick in inflation later in the session.

Consumer sentiment data for June and federal budget data for May are among some of the other data releases scheduled for Friday.