(Bloomberg) -- The auction of three-year US Treasury notes on Monday drew the highest yield since 2007, reflecting the recent bond-market selloff driven by anticipation the Federal Reserve will keep rates elevated into next year.

The $44 billion sale was awarded at 4.660%, the highest for an auction of that maturity since before the financial crisis. 

While market yields for existing three-year notes remain slightly below the multi-year high reached during the first week of July, previous auction results didn’t capture that peak because they followed rebounds in the market. Until this month, the highest three-year auction result in 2023 was 4.635% in March.

While traders still expect the Fed to lower interest rates next year, they’ve priced in a later start and a smaller total amount of cuts in response to resilient economic data. Moreover, the scale of the cuts would still leave the bank’s benchmark rate well above the level considered neutral to economic growth. 

Treasury yields also have also been pushed higher by growth in the supply of new notes and bonds to finance the US government’s widening budget gap. The three-year tenor increased by $2 billion this month and last month.

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