US inflation hit 7.9 per cent in February - its highest point in 40 years - and US Treasury yields spiked higher to nearly 2 per cent.
Data out on Friday showed New Zealand food prices rose 6.8 per cent in February - the largest annual increase since July 2011.
In the bond market, yields rise when prices fall.
Adding to last week's bearish theme was the European Central Bank, which said it would stop pumping money into financial markets, thereby leaving the message that soaring inflation outweighed concerns about Russia's invasion of Ukraine.
Harbour Asset Management fixed income and currency strategist Hamish Pepper said higher fuel prices arising from the Russian invasion had served to push already firming bond yields higher still.
"There is a supply shock and it has come at a time when inflation was already very high, and expectations of inflation were above central bank forecasts," Pepper said.
Markets were pricing in a higher inflation component into bond yields.
Pepper said there was also a growing realisation that central banks cannot "look through" the energy supply shock in ways that they have been able to in the past.
"People are assuming that central banks are going to have to work harder to eventually bring inflation lower," he said.
Pepper said New Zealand bonds were feeling the pressure more acutely than their foreign equivalents because of the capacity constraints they already faced before the conflict in Europe.
A day before Russia's invasion, the Reserve Bank raised its official cash rate (OCR) by 25 basis points to 1.0 per cent.
At the time, the bank surprised the market with a statement from its monetary policy committee to the effect that the decision was a close-run thing.
"When deciding whether to move the OCR up by 25 or 50 basis points, many members saw this as a finely balanced decision," the committee said.
"When considering the case for a 50 basis point increase, the committee noted the high starting point for inflation and the drift upwards in measures of inflation expectations," it said.
The upshot of that was the realisation that the Reserve Bank was a lot more hawkish on the inflation front than many had anticipated, even though it hiked by just 25 basis points.
To that end, ANZ economists are now forecasting back-to-back 50 basis point hikes for the official cash rate in April and May.
ANZ now sees the official cash rate reaching a peak of 3.5 per cent in April 2023 from a previous forecast of 3 per cent.
"ANZ has been getting the attention (with its forecast)," Pepper said.
"Whether you believe that or not, it speaks to the current market narrative."
