Treasury yields rose to the highest in a year as rising energy costs and the outlook for more U.S. government spending bolstered reflation trades.

Rates on 30-year debt pushed above 2% to the highest since February 2020, while 10-year yields rose as much as six basis points to 1.265% after they began trading on Tuesday following a U.S. holiday. German bunds and U.K. gilts extended declines after starting the week on the back foot.

It all adds up to the worst start to the year since 2013 for a gauge of global bond performance as investors buy into signs the world’s economy is starting to recover from pandemic-induced shutdowns, prompting asset managers to ditch bonds and plow cash into stocks. Rising energy costs amid extreme weather conditions in the southern U.S. and expectations for more stimulus now that Donald Trump’s impeachment trial is in the rear-view mirror are further boosting the outlook for inflation.

“It’s a combination of reflation expectations, rising energy prices and stimulus bets, plus there is also a plentiful supply of bonds,” Jens Peter Sorensen, chief analyst at Danske Bank A/S, said of the surge in yields. “I think a lot of investors are sidelined in order to see where this ends—do we have a new trend, or is it just a short spike?”

U.S. yields could be headed even higher. Strategists at TD Securities have warned that further increases in rates could prompt offsetting flows in swaps, which have in the past created even more upward pressure. Hedging of mortgage bonds, often known as convexity hedging, could materialize if 10-year Treasury yields continue to rise past 1.30%, they said.

None of this is good news for those who bought into U.S. auctions last weeks. Investors snapped up $68 billion of 10- and 30-year debt at yields almost 10 basis points lower than current levels.

In the U.K., 30-year bonds extended their decline after delivering the worst performance in the region on Monday. Yields hit the highest level since March and the FTSE 100 rose for a fourth day, after the country hit a milestone in its vaccination program, supporting calls for easing of social restrictions.

Germany’s benchmark yield also hit a milestone, climbing to levels last seen in June amid a significant slowdown in virus cases.

The selloff was broad, with even Italian bonds—which would typically outperform safe haven assets such as German bunds when credit spreads tighten and stocks climb—under pressure. The announcement of a new 10-year benchmark bond sale to take place via syndication saw yields also advance five basis points on Monday. Still, demand on Tuesday set a record of more than 110 billion euros ($134 billion).

By contrast, stocks rallied strongly to start the week. Japan’s Nikkei Index broke above 30,000 for the first time since 1990, while S&P Index futures printed another record high on Tuesday.

”You do have expectations of a swift recovery later this year, higher inflation expectations and some signs of actual inflation picking up as well,” said Jan von Gerich, chief strategist at Nordea Bank Abp. “At the same time, central banks are not fighting the higher yields.”

—With assistance from John Ainger and James Hirai.

This article was provided by Bloomberg News.