The yield on short-dated US government bonds rose on Wednesday to the highest level since March 2020, as further signs of stubbornly high inflation drove investors to bet on global rate increases.

The latest wave of selling in the shorter term portion of the bond market, which is particularly sensitive to monetary policy expectations, came after data showed a core Australian inflation measure rose to an annual rate of 2.1 per cent in the June to September quarter, pushing it into the central bank’s target range for the first time since 2015.

Markets are betting that the Reserve Bank of Australia will raise rates from the current record lows as soon as next summer, despite the central bank’s repeated insistence that borrowing costs will not need to rise until 2024. Three-year bond yields rose as high as 0.95 per cent on Wednesday, up from 0.76 per cent a day earlier.