US Treasury yields scale multi-year highs as inflation fears return

US Treasury yields surged to multi-year highs on Monday, driven by rising inflation concerns, according to a US Institute for Supply Management (ISM) survey. The ISM Services PMI fell below expectations, indicating that business activity in the services sector slowed while input prices surged. The 30- and 10-year yields reached new peaks, with the 10-year yield increasing by over 3 basis points to 5.307%.

This rise in yields came amid fears that high energy prices could push global bond yields higher. France's fiscal crisis also contributed to the upward trend in global bond yields. Meanwhile, the US Oil benchmark, West Texas Intermediate (WTI), fell more than 2% to $89.29 due to the G7 agreeing to release over 100 million barrels of crude and diesel, easing supply pressures.

The release of the ADP Employment Change 4-week average figures on Tuesday and the unveiling of the Federal Open Market Committee (FOMC) monetary policy meeting minutes on Wednesday will be closely watched by traders. The probability of a Federal Reserve interest rate hike this month was diminished by weaker-than-expected inflation data.

The Federal Reserve sets base lending rates to ensure price stability, typically targeting a core inflation rate of around 2%. Higher interest rates can strengthen a country's currency and have a negative impact on the price of Gold, as it increases the opportunity cost of holding Gold instead of investing in interest-bearing assets.