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(Bloomberg) -- Treasury debt slipped as gains for US stocks reinforced the broadening conviction on Wall Street that Federal Reserve interest-rate cuts are unlikely before December.

The US government bond market erased gains that were spurred by April inflation data that showed smaller increases in consumer prices than economists estimated. The two-year note’s yield, more sensitive than longer maturities to expected changes in the Fed’s rate, was little changed at about 4.02% after earlier dipping to 3.95%.

While derivative contracts continue to price in two quarter-point rate cuts by the Fed this year, several major Wall Street banks this week forecast a rate cut in December, later than they previously anticipated. The changes were based on the US trade truce with China announced Monday, which along with comments by President Donald Trump during a US-Saudi investment forum in Riyadh drove gains for US stocks.

“Some money is moving out of Treasuries and into risk assets,” said Tony Farren, managing director in rates sales and trading at Mischler Financial Group. “It’s a bit of a momentum trade for now.”

Trump said Saudi Arabia would commit to investing $1 trillion in the US and predicted further gains for the stock market.

Also contributing to the selloff, Farren said, is investor concern about the US fiscal outlook. On Monday, the Republican majority in the House of Representatives unveiled a draft tax bill that’s estimated to result in a $3.7 trillion revenue loss over 10 years.

“The other big part of the inflation story going forward is the fiscal stimulus that’s beginning to emerge on Capitol Hill,” David Kelly, chief global strategist at JPMorgan Asset Management, said on Bloomberg Television. “Inflation’s going to move up in the short run because of tariffs, and then in 2026 because of renewed fiscal stimulus.”

Yields on 10- to 30-year bonds climbed by several basis points to the highest levels in a month. In the interest-rate options market, traders showed a bias for wagers that profit if long-maturity yields rise. The Bloomberg Dollar Spot Index fell 0.5%, erasing about half of its Monday gain.

A heavy slate of new investment-grade corporate bonds — another sign that investors are embracing risk after avoiding it for several weeks after the trade war broke out in early April — was also a factor.

Meanwhile, the inflation outlook remains cloudy, despite the April consumer price index data.

While the Trump administration’s tariffs are widely expected to boost inflation, companies may still be working their way through a massive stockpile of built-up inventory before resorting to raising prices.

“The bond market still has concern over stability of core goods prices in the coming two data cycles.” said Ian Pollick, head of fixed income, commodities and currency strategy at CIBC. “And given the Fed requires the labor market to turn prior to easing, a weaker print today matters very little for the level of yields.”

Even before the release of the CPI data — which had the potential to affect expectations for when the Fed might resume the rate cuts it began last year — several big-bank economists this week became less sanguine about the prospect of lower rates.

Goldman Sachs on Monday projected a cut in December, a change from July, and less frequent subsequent cuts. Barclays also changed also changed to December from July, and JPMorgan Chase & Co. revised its call to December from September. Citigroup economists shifted their prediction to July from June.

Trade tensions may yet prove damaging to the US economy, even as the temporary reprieve has been a boon to sentiment.

“On balance, particularly for the Fed as well, it does mean somewhat slower growth,” Michael Pyle, deputy head of BlackRock Inc.’s portfolio management group, said on Bloomberg Television. “The tariffs that remain will have to be absorbed either in prices or margins, and that changes the outlook for what we can expect in terms of growth and profitability in the US.”

--With assistance from Edward Bolingbroke, Michael Mackenzie and Jade Khatib.

(Updates yield levels.)