The growing prospect of a Trump presidential victory is making yield curve steepeners an attractive bet as growth will likely slow and inflation quicken under such a scenario, according to Morgan Stanley.

Global bonds are slumping after two shock interest-rate hikes this week served traders a reality check that central banks are far from done fighting inflation.

Treasury bills maturing in the first half of June rallied as trading resumed following the Memorial Day holiday after a deal to lift the debt ceiling eased concern over the prospect of a calamitous US default.

Treasuries extended their slump in New York, driving the yield on the benchmark 10-year note up by the most in more than three weeks, as renewed inflation concerns and economic data supported expectations for multiple Federal Reserve rate hikes in coming months.

U.S. Treasuries tumbled Monday, driving the yield on five-year notes to the highest level since September 2008 amid speculation persistent inflation will prompt the Federal Reserve to tighten policy more aggressively.

U.S. government bonds dropped across the curve, with the two-year yield up two basis points to 2.47% as of 11:28 a.m. in New York. The 10-year yield rose two basis points to 2.85%, while a long-maturity Treasury ETF suffered a nearly 30% decline from a peak in August 2020 -- a record drawdown.

The bond market’s age-old measure of growth is flashing an ominous warning as the world’s central banks move closer to boosting interest rates from near record lows.

Hedge funds couldn’t have picked a worse time to be short the dollar while holding Treasury curve steepener positions.