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Two-year Treasury yield rises to highest since September 2008

Short-term interest rates rose to their highest levels since the financial crisis, as investors bet on more Federal Reserve hikes with inflation showing signs of life.

The yield on the two-year Treasury note hit a high of 2.373 percent, its highest level since Sept. 9, 2008, when the two-year yielded as high as 2.375 percent. Yields retreated off session highs later in the day amid a drop in equity markets.

Minutes from the Federal Open Market Committee’s March meeting released this week showed central bankers largely hopeful about the direction of the economy and unanimous in expectations of higher inflation.

A strong report on jobless claims this week along with a positive start to first-quarter earnings season added to investor confidence that the economy is strengthening at a pace that will warrant further tightening by the Fed.

Two-year Treasury yield rises to highest since September 2008

The yield on the benchmark 10-year Treasury note was largely unchanged at 2.828 percent at 1:49 p.m. ET, while the yield on the 30-year Treasury bond was also flat at 3.035 percent. Bond yields move inversely to prices.

Markets have been on edge in recent days after Trump appeared to criticize the Kremlin for its supporting Syrian President Bashar Assad, following a suspected chemical attack last weekend. Markets have since eased, after Trump clarified his position on a possible missile attack in Syria.

Equities rallied after the president clarified his take on Syrian intervention, appearing to give investors confidence to shift money away from so-called safe havens and back into stocks.

On Friday, economic data and speeches by members of the U.S. central bank are expected to keep bond investors busy.

U.S. consumer sentiment slipped in April after recording its highest level since 2004 in the previous month.

The University of Michigan’s mid-month report on consumer attitudes about the economy inched down to 97.8 in mid-April, compared with 100.5 expected by a survey of Reuters economists.

In central banking news, St. Louis Fed President James Bullard is due to speak at Washington University’s Calhoun lecture series in St. Louis. In Texas, Dallas Fed President Robert Kaplan will be at the Odessa Chamber of Commerce member luncheon, while Boston Fed President Eric Rosengren will attend Greater Boston Chamber of Commerce’s Economic Outlook Breakfast in Boston.

Investors will be watching these speeches closely to see if any of the central bankers talk about the state of the U.S. economy, after the latest minutes release by the Federal Open Market Committee was published this week.

โ€” CNBC’s Gina Francolla contributed to this report.

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