The 10-year Treasury yield rose to its highest level in more than a decade as investors continued to assess the prospect of the Federal Reserve taking the most aggressive step yet in its fight to lower soaring inflation.
The yield on the benchmark 10-year Treasury note was last up 11 basis points to 3.483% as it notched a high not seen since April 2011.
Meanwhile, the 2-year yield jumped nearly 16 basis points to 3.437% and hit its highest level since 2007, while the 30-year Treasury bond was last up 6 basis points to 3.428%. Yields move inversely to prices, and a basis point is equal to 0.01%.
After ending May at 2.74%, the 10-year yield has rocketed higher this month as hot inflation readings caused investors to dump bonds and ratcheted up their bets for aggressive Fed tightening. The 10-year is also up sharply from where it started 2022 at — 1.51%.
"The Federal Reserve is still way behind where the market is bringing rates," said Timothy Lesko of Mariner Wealth Advisors. "Even if the Federal Reserve were to raise by the now expected 75 basis points and a couple of 50 or 75 basis point increases the market is ahead of the Fed pretty significantly."
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These moves come as investors brace themselves for a 75 basis-point hike from the Fed this week, rather than a 50 basis-point hike many had come to expect. That's because last week's inflation report showed prices running hotter than expected.
The Federal Open Market Committee in May raised the target range for the federal funds rate to 0.75% to 1% from 0.25% to 0.5%.
During the previous session, the 10-year notched its biggest move since 2020. The 2-year and 10-year Treasury yield curve also briefly inverted for the first time since early April as investors prepared for the prospect of aggressive monetary policy tightening to lower inflation. This measure is closely monitored by traders and is often seen as an indicator of a recession.
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Fresh U.S. inflation data was also released on Tuesday, with the government reporting that wholesale prices rose 10.8% in May. That's near a record.
"The move in the 10-year Treasury yield toward 3.5% shows the market's fear that the Fed may fall further behind the curve is increasing," wrote UBS strategists led by Mark Haefele. "In turn, this will give the Fed less room to 'declare victory' and ease off on rate hikes. As a result, the risks of a Fed-induced recession have increased, in our view, and the chances of a recession in the next six months have risen."
Tuesday's swings come after an intense sell-off during the regular session on Wall Street as market participants await the start of the Federal Reserve's two-day policy meeting, which concludes on Wednesday.
— CNBC's Sarah Min contributed to this report.