twoyear treasury yields held near 15year highs on tuesday as signs of stubborn inflation in europe increased concerns that central banks will continue tightening monetary policy treasury yields moved back toward recent highs after data from europe showed further evidence of sticky inflation across developed economies the french consumer price index increased 62 in february up from 6 the month before spanish inflation also came in hotter than expected the reports suggest the eurozonewide consumer prices report due on thursday may show inflation once again picking up speed benchmark german 2year bond yields tmbmkde02y jumped 9 basis points to 3157 the highest since 2008 as the market fully priced in the european central bank taking interest rates to a peak of 4 by february 2024 twoyear uk gilt yields tmbmkgb02y moved to a fourmonth high above 4 after a report from kantar showed british grocery prices rising at a record annual pace of 171 in the four weeks to february 19th the evidence of stubborn inflation in europe matches the signal from last friday’s us pce report which many traders reckon raises the chances that the federal reserve will keep borrowing costs higher for longer markets are pricing in a 753 probability that the fed will raise interest rates by another 25 basis points to a range of 475 to 50 after its meeting on march 22nd according to the cme fedwatch tool the central bank is expected to take its fed funds rate target to 541 by september 2023 according to 30day fed funds futures us economic updates set for release on tuesday include the trade balance in goods retail inventories and wholesale inventories all for january and all due at 830 am eastern the case shiller home price index for january will be published at 9 am followed at 10 am by the february consumer confidence report chicago fed president austan goolsbee is due to speak at 230 pm what are analysts saying in a note published before the european inflation data rbc capital markets’ chief us economist tom porcelli wrote “we are adding in two additional 25bp hikes beyond the march meeting we think terminal of that magnitude 55 top end of the range is unnecessary and there seems to be an overreaction to recent data but clearly what we think in this regard doesn’t matter when you have a fed clearly intent on doing more what happens to the cuts we’re forecasting around yearend at this point we see no reason to remove them” “if our view that the unemployment rate gets to 45 by yearend is roughly right as long as it also coincides with our other view that core inflation has slowed to around 3 we think the fed will cut if inflation is moving in the right direction and the urate is moving in the wrong direction it doesn’t seem like a stretch to think the fed would take back some of these very aggressive hikes you could call it “recalibrating” cuts”