(Bloomberg) -- US five- and 10-year yields rose to the highest levels since 2007 after hotter-than-anticipated inflation data in Canada and rising oil prices added to global concerns about resurgent price pressures.

The five-year Treasury yield rose as much as 7 basis points to 4.52%, the 10-year as much as 6 basis points to 4.365%. The two-year note’s yield came within a basis point of a new multiyear high.

The shifts reflect the bond market recognizing that the Federal Reserve will be keeping its policy rate high for an extended period, according to Gregory Peters of PGIM Fixed Income.

“The market is finally coming to a realization, after fighting the last 18 months, that rates are indeed higher and we are not going back to a pre-pandemic type level,” the co-chief investment officer said on Bloomberg TV. He added that investors should watch where the Fed sets its peak rate for this cycle in order “to get a better understanding of whether they believe terminal rates are higher.”

Canadian yields surged, with the two- and 10-year tenors reaching multiyear highs, as traders priced in higher odds of another interest-rate increase by the country’s central bank. A report showed the domestic inflation rate accelerated by more than expected for a second straight month.

A 2.5% increase in the futures price of crude oil to the highest level since November — though not sustained — underscored global inflation pressures.

The jump in US yields comes as the Fed began a two-day meeting Tuesday at which it’s expected to leave rates unchanged. Still, traders are pricing in about even odds of another increase by year-end, which would be the 12th hike since March 2022 in its battle to curb inflation. 

Investors are also keenly focused on Fed officials updated quarterly rate projections — known as the dot plot — that will be released Wednesday at the conclusion of the policy meeting. High on the watchlist will be whether these forecasts continue to reveal a median view for one more quarter-point hike this year and whether projections for 2024 scale back the 100 basis points of rate reductions that officials foresaw in June.

Read more: Bond Market at Risk of Third Annual Loss Needs a Dot-Plot Rescue

The rise on oil prices also works as an effective additional tax on consumers and will likely complicate the Fed’s decision ahead as to whether they need to pause or continue to raise rates, PGIM’s Peters said.

US Treasuries are already at risk of a third straight year of losses, with the market down 0.3% in 2023 through Monday, according to a Bloomberg index. Treasuries lost 12.5% in 2022 after being in the red by 2.3% the year prior.

(Adds 10-year, updates yield levels.)

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