(Jan 16): Treasury yields climbed as trading resumed after a US holiday, with investors showing concern the Federal Reserve may be reticent to cut interest rates as early as March.

Yields on US notes gained across the curve in Asia trading on Tuesday, echoing similar earlier moves in European debt after hawkish comments from European Central Bank policymakers. The 10-year yield rose six basis points to 3.99%, and briefly topped 4%.

A possible pivot to rate cuts by the Fed has been the centre of market attention as inflation slowed from its peak in mid-2022. Investors are awaiting a speech by Fed governor Christopher Waller scheduled for Tuesday after chair Jerome Powell gave a clear signal in December that a series of rate cuts was in the pipeline for 2024.

“There has been a chorus of Fed and ECB officials trying to tame market expectations for aggressive rate cuts,” said Prashant Newnaha, a senior Asia-Pacific rates strategist at TD Securities in Singapore. “For quite some time the market has ignored their utterances, but it does appear the market paid some attention to ECB comments overnight.”

Threats stemming from lingering inflation and geopolitical risks will prevent the ECB from lowering interest rates this year, governing council member Robert Holzmann said in an interview.

Treasuries look vulnerable after traders priced in what looks like too many interest-rate cuts from central banks, said Kellie Wood, deputy head of fixed income at Schroders Plc in Sydney. Her firm recently took profit on long positions in bonds, while maintaining bets on a steeper curve and holding inflation-linked debt.

“Close to seven cuts this year seems excessive,” Wood said, after traders priced in as much as 170 basis points of reductions in the Fed rate on Friday. “The front end is overbought on positioning and loaded with profit, so that could signal a reversal” is coming.

The rise in yields boosted the US currency against its peers. The Bloomberg Dollar Spot Index gained 0.4% to 1,231.32 as of 6:05am London time on Tuesday. An advance beyond the Jan 5 high of 1,231.44 would bring the gauge to the highest since mid-December.

Australian bonds also sold off, with the yield on the country’s 10-year note jumping seven basis points to 4.15%. Similar-dated Japanese yields climbed three basis points to 0.585%, heading for their largest increase this month.