(Bloomberg) -- Global bonds are poised to erase all of the gains they made in their best start to a year on record.

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Fixed-income assets have gone into reverse as central banks around the world have stood by their intention to keep raising interest rates to tame inflation, defying bond bulls who piled into debt last month betting on a pivot. Treasuries tumbled Tuesday on further signs the world’s biggest economy is proving resilient despite almost a year of policy tightening.

“Global bonds can decline further in coming weeks due to the ongoing recalibration of the economic outlook and the Fed’s reaction function,” said Damien McColough, head of fixed-income research at Westpac Banking Corp. in Sydney. The “higher for longer narrative” for central bank interest rates is the driver, he said.

A Bloomberg index of global bonds has dropped 2.9% this month through Tuesday, unwinding almost all of its 3.3% surge in January, which the best first month of a year since the gauge was introduced in 1990.

Boosting Bets

The Treasury 10-year yield jumped 14 basis points to 3.95% Tuesday as S&P Global US manufacturing and services PMIs both beat forecasts, and traders boosted bets on Federal Reserve rate hikes. The selloff showed signs of abating Wednesday as fresh signs of demand appeared for the sort of interest payments that haven’t been available for most of the past decade.

“Investors are likely to buy back in once they judge yields are high enough to justify that move, given data indicating strong flows into bonds as an asset class,” said James Wilson, a senior fund manager in Melbourne at Jamieson Coote Bonds. “We are dipping our toes into the markets at these very attractive valuations.”

Two-year US bonds led gains, with yields retreating five basis points to 4.67% on Wednesday. The 10-year yield eased one basis point lower to trade at 3.94%.

“The US 10-year yield looks set for a move above 4%,” McColough said. “My sense is that there will still be a strong yield-seeking bid when volatility settles down a bit, likely at around the 4.15%-to-4.20% range.”

New Zealand’s central bank on Wednesday was the latest to warn against the dangers of elevated inflation. Policy makers hiked their benchmark by half a point as economists forecast to 4.75%, the highest in the developed world.

Read More: Investors Stung by Treasuries Rout Brace for Next Fed Blow

--With assistance from Toby Alder.

(Adds investor comment in sixth paragraph, Wednesday Treasuries moves in seventh.)

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