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A global bond pullback pushed US Treasury yields to their highest level in three months on Monday, as investors reacted to the prospect of monetary policy tightening by getting rid of US and UK debt -United.

The yield on the 10-year US Treasury bill, which moves in reverse of its price, added 0.05 percentage point to trade above 1.5% for the first time since late June.

The yield on UK 10-year gilts rose 0.05 percentage point to 0.973%, its highest level since May 2019.

The moves continue a bond rout that began last week after relatively hawkish central bank meetings on both sides of the Atlantic.

The U.S. Federal Reserve said half of its policymakers expected U.S. rates to rise in 2022 after consumer price inflation exceeded 5% for three consecutive months.

The Bank of England also warned that UK inflation could rise above 4 percent next year, signaling it could raise borrowing costs from record highs.

Analysts said the prospect of higher rates, along with still high inflation, fueled a resumption in widespread betting on higher yields that had been largely crowded out of the markets during a massive summer debt rally.

“Reflation trading is not dead,” said Peter Chatwell, head of multi-asset strategy at Mizuho. “It appears that this supply shock is not as transient as everyone thought, so if you are a central banker you need to set your policy accordingly.”

In the meantime, stock markets have fallen on Wall Street and in Europe, despite rising oil prices that pushed energy stocks higher.

The Stoxx Europe 600 fell 0.2%, with an increase of more than 2% for its energy sub-sector not topping losses in tech and healthcare stocks whose valuations may be depressed by expectations higher interest rates.

Wall Street’s blue-chip S&P 500 index opened 0.3% lower while the tech-rich Nasdaq Composite fell 0.7%.

The S&P is up 18% in 2021 while the Stoxx is up 16%. Investors are awaiting the end of the easy wins, driven by monetary stimulus and a strong economic recovery in the United States after Covid-19, as central banks prepare to reduce their support.

“Central banks are just getting a little more hawkish,” said Grace Peters, head of investment strategy for Europe at JPMorgan’s private bank.

“But we are in a market that is fighting against itself,” she added, referring to a “downward buying mentality”, where investors had reacted to recent stock market falls by supplementing their holdings.

Brent crude rose 1.5% to $ 79.55 a barrel on Monday, its highest level since October 2018. The international benchmark oil index rose nearly 9% this month after the group of Opec producers forecast that demand for the product next year would be slightly exceed 2019 levels.

U.S. production was also reduced by damage from Hurricane Ida, while a gas shortage in Europe boosted expectations of rising oil demand.

But rising oil prices have fueled fears that central banks will increase borrowing costs to contain inflation.

With bond markets likely to be more under pressure from interest rates and inflation expectations, Peters added, “stocks seem to be the safest place.”

The dollar index, which measures the US currency against six others, added 0.1 percent. The British pound rose 0.2% against the dollar to $ 1.3712.

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