Treasury yields climbed on Thursday as surging oil prices stoked expectations that inflation will accelerate in 2017. The 10-year yield TMUBMUSD10Y, +1.94% gained 1.9 basis point to 2.402%, trading just below a 17-month high of 2.420%. The two-year yield TMUBMUSD02Y, +2.14% added 1.2 basis point to 1.139%. The 30-year yield TMUBMUSD30Y, +1.87% rose 2.2 basis points to 3.059%. Treasury yields rise as prices fall. U.S.-traded oil futures climbed more than 9% on Wednesday after the Organization of the Petroleum Exporting Countries agreed to cut production for the first time in eight years. Higher fuel prices eventually filter through to the broader economy, driving up prices of consumer goods. Typically, when bond investors expect inflation to rise more aggressively, they demand higher yields to compensate for the corrosive effect that inflation has on real returns. –– ADVERTISEMENT –– “We had a huge repricing in oil yesterday and that’s definitely pushing yields higher,� said Subadra Rajappa, head of U.S. rates strategy at Société Générale. Oil continued to rise on Thursday, with Brent crude LCOG7, +2.95% , the global benchmark topping $52 a barrel on London’s ICE Futures Exchange. Oil futures CLF8, +6.66% traded on the New York Mercantile Exchange traded above $50 a barrel. President-elect Donald Trump’s unexpected victory in the Nov. 8 U.S. election sparked an exodus out of global bond markets in November, with Treasurys seeing their worst month of performance since late 2009. Read: How the bond market became the most exciting game on Wall Street Investors expect that Trump’s fiscal policies, should they become law, would cause inflation to accelerate aggressively by driving up workers’ wages. Many of the world’s top investment banks expect yields to rise in 2017. A weekly jobless claims report showed the number of Americans applying for unemployment benefits increased by 17,000 last week to a seasonally adjusted 268,000. Despite the increase, the number remained near multidecade lows, suggesting that the U.S. labor market remains robust ahead of the Fed’s December meeting. The central bank is widely expected to raise interest rates this month. Investors are now turning their attention to the November jobs reported, expected at 8:30 a.m. Eastern on Friday.

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