U.S. Treasury yields jumped to two-and-a-half-year highs on Monday, ahead of what is expected to be the U.S. Federal Reserve's first rate hike in three years on Wednesday to try to tame soaring inflation that shows no signs of slowing.

Investors priced for the U.S. central bank to hike rates more aggressively this year, after data on Thursday showed that annual inflation in February rose at the fastest pace in 40 years, forcing Americans to dig deeper to pay for rent, food and gasoline.

The market “is focusing more on domestic fundamentals after last week’s CPI print and is penciling in more and more rate hikes,” said Gennadiy Goldberg, an interest rate strategist at TD Securities in New York. Investors have been balancing more aggressive Fed policy against geopolitical risks following Russia’s invasion of Ukraine.

Demand for safe haven U.S. bonds also fell on Monday on hopes that Russia and Ukraine will reach an agreement to end the war. Two-year yields, which are the most sensitive to rate hikes, jumped to 1.832%, the highest since Aug. 2019.

Benchmark 10-year yields reached 2.106%, the highest since July 2019. The yield curve between two-year and 10-year notes steepened three basis points to 27 basis points, after reaching 19 basis points a week ago.

Fed funds futures traders are pricing for the Fed’s benchmark overnight interest rate to be 1.82% by its December meeting, up from 1.75% on Friday, and compared to 0.08% today. Breakeven rates on five-year Treasury Inflation-Protected Securities (TIPS), a measure of expected annual inflation for the next five years, are at 3.48%, after hitting a record 3.50% on Friday. Investors will be looking for more clarity from the Fed on how many rate hikes are likely this year, and whether concerns about rate hikes denting the economy may override inflation fears.

“Our expectation is that it is a hawkish hike,” said Goldberg. “Yes, they are certainly concerned about the geopolitical risks, but on the domestic side they are very worried about higher inflation and they do see growth as being solid enough that they can continue to push rates higher.”

Fed officials will update their rate forecasts and economic projections for the first time since Dec. Investors will also be looking for any details on the size and timing of when the Fed will begin shrinking its $8.9 trillion balance sheet.