TREASURIES-US yields rise as investors pare back Fed cut bets

SINGAPORE, March 19 (Reuters) - U.S. Treasury yields rose on Thursday, led by the short end, as investors heavily scaled back Federal Reserve rate-cut bets for this year after the central bank struck a hawkish tone and flagged inflation risks.

The two-year yield US2YT=RR, which typically reflects near-term rate expectations, was up roughly 6 basis points in Asia to 3.8051%, its highest since August 2025.

The benchmark 10-year yield US10YT=RR was up nearly 2 bps at 4.2748%, while the five-year yield US5YT=RR rose 3 bps to 3.8903%.

The Fed held rates steady on Wednesday as expected but forecast higher inflation, and individual projections showed a "meaningful" number of policymakers pencilling in less easing this year than they did three months ago, with the outlook clouded by the ongoing Middle East conflict.

"The big takeaway from the Fed decision is that the Fed will not be riding to the economy's rescue, even if gas and diesel prices keep rising," said Bill Adams, chief economist at Comerica Bank.

"Monetary policy can slow growth and inflation, or it can speed up growth and inflation. But it can't offset an energy supply shock, which weakens growth at the same time that it raises inflation."

Investors are now pricing in just 11 bps worth of Fed easing by December, compared with more than 50 bps before the start of the U.S.-Israeli war on Iran. 0#USDIRPR

The widening Middle East conflict has pushed Brent crude futures LCOc1 past $110 a barrel on Thursday and shown little sign of easing, keeping energy prices elevated and reviving inflation risks that have upended rate-cut expectations.