The losses in the US Treasuries market intensified on Wednesday as robust economic data and a weak auction drove yields across most maturities to the highest levels in almost two decades. Higher oil prices sparked the declines earlier in the session, fanning worries around elevated inflation and punishing European government debt as well. Releases showing stronger-than-forecast US manufacturing and services activity accelerated the slide, which then picked up speed as a five-year Treasury auction drew surprisingly dim demand.

The auction results pushed the yield on five-year US notes above 5% for the first time since 2007, leaving the two- and three-year maturities the only coupon-bearing tenors below that milestone level. Thirty-year yields surged closer to their highest since 2004. The selloff spilled over into stocks, with the S&P 500 Index dropping almost 1% at one point.

“You don’t want to step in front of the freight train today,” said Sean Simko, head of fixed-income investment management at SEI Investments. “You’re seeing the trifecta — stronger economic data, supply pushing the five-year to levels we haven’t seen in years and the view that inflation is sticky globally.” The economic data and the jump in oil prices amid the standoff in the Middle East led traders to boost bets on further Federal Reserve policy tightening.

Swaps now fully reflect three quarter-point hikes over the next year, with significant hedging for a fourth increase. If realized, that would take the central bank’s target rate into a range of 4.75% to 5%. “Pressure is starting to build up on the short end of the yield curve,” said Christophe Boucher, CIO of ABN AMRO Investment Solutions. Wednesday’s economic data will allow the Fed to “double down” on its hawkish stance, he said.