Inflation worries sparked a front-end led selloff in Treasuries on Thursday as market participants increasingly believe the Federal Reserve will only cut rates by a quarter-point at the end of the month.

U.S. two-year yields were up 12.4 bps to 2.09%, five-year yields up 8.3 bps to 2.90%, 10-year yields up 4.8 bps to 3.74% and 30-year yields up 3.4 bps to 4.53%. The Eurodollar June 08 contract was down 15.0 ticks to 97.14. The 10/2 year curve is 7.73 bps flatter at 164.72 bps.

Jeff Given, portfolio manager at John Hancock Advisors, said the selloff at the front end is the result of heightened inflation worries and better value elsewhere.



"There's a possibility the Fed doesn't cut much more, - if at all - because of some of the inflation numbers we've seen," Given said.

Fed fund futures show that a 25 bps cut is fully priced in at the April 30, but the odds of a 50 bps have fallen to 18% from 42% a week ago.

Given expects the Fed to cut a cumulative 75 bps over the next three meetings to lower the Fed funds rate to 1.50%, but he still sees little value in Treasuries.

"At these yield levels I wouldn't be a buyer. Treasuries are one of the most overvalued securities out there," Given said.

By Adam Button and edited by Cristina Markham