(Bloomberg) -- The last time US government bonds sold off this much as the Federal Reserve started cutting interest rates, Alan Greenspan was orchestrating a rare soft landing.

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Two-year yields have climbed 34 basis points since the Fed reduced rates on Sept. 18 for the first time since 2020. Yields rose similarly in 1995, when the Fed — led by Greenspan — managed to cool the economy without causing a recession. In prior rate cutting cycles going back to 1989, two-year yields on average fell 15 basis points one month after the Fed started slashing rates.

Rising yields “reflect the reduced probability of recession risks,” said Steven Zeng, an interest rate strategist at Deutsche Bank AG. “Data has come in pretty strong. The Fed may slow the pace of rate cuts.”

The latest backup in yields shows how a resilient US economy and buoyant financial markets limit the options for Fed Chair Jerome Powell to aggressively lower rates. Interest swaps show traders are expecting the Fed to lower rates by 128 basis points through September 2025, compared with 195 basis points priced in about a month ago.

Global bonds have been sliding this week as investors weigh the potential of slower rate reductions, leaving a gauge of total return in Treasuries up just 1.7% this year through Monday. That trails the 4.3% gain in T-bills over that period.

The selloff extended slightly on Tuesday, pushing the 10-year yield up about one basis point after an increase of 11 basis points on Monday. The recent rise has brought the yield on the benchmark to around 4.2%, up from a 15-month low of 3.6% on Sept. 17 — one day before the Fed lowered borrowing costs by half a point.

On Tuesday, trading activities suggested that sentiment remains bearish, with a series of sales of block trades in 10-year note futures. In the options market, one trade targets the 10-year yields rising to about 4.75% by the option expiry on Nov. 22.

In 1995, the Fed slashed interest rates just three times — from 6% to 5.25% — in six months, after lifting them sharply. Yields on 10-year notes jumped more than 100 basis points 12 months later after the first cut that year, while two-year yields rose 90 basis points.

This time, rising yields also reflect growing concern that the Republican Party could take control of both the White House and Congress in the Nov. 5 election, potentially boosting the federal deficit and inflation.