US yields rise on supply, 10-year touches 2%

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US 1-YR
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US 10-YR
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U.S. Treasurys yields rose on Tuesday with 10-year yield hitting 2 percent as investors reduced bond holdings to make room for government and corporate supply while waiting on the outcome of the Federal Reserve's policy meeting.

Data from S&P/Case-Shiller showing a stronger-than-expected rise in U.S. home prices in February added to selling in Treasurys.

Peter Boockvar, chief market analyst at The Lindsey Group, said 2 percent has been the upper end of the 10-year's trading range.

"It's noteworthy that longer (term) rates are moving higher," Boockvar said. He attributed the climb to a combination of things, including commodities bottoming, higher inflation expectations and less foreign buying.

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The Treasury Department sold $35 billion in five-year notes, part of this week's $90 billion in fixed-rate supply, at the lowest yield since January.

Treasurys yields briefly back-tracked from session highs following a surprise drop in the Conference Board's index on U.S. consumer confidence to its lowest level since December.

The decline in bond prices was also limited by the absence of a breakthrough in talks between Greece and its creditors. Greek borrowing costs have fallen since Monday on hopes Athens will soon obtain more cash after Greek Prime Minister Alexis Tsipras reshuffled his negotiation team.

"It's a double dose of Treasurys and corporate supply. There's a crowding out effect," said Stanley Sun, interest rate strategist at Nomura Securities International in New York. Large corporate deals competed for investors' dollars, with Amgen and Oracle bringing out multi-part issues worth $3.5 billion and $10 billion, respectively, according to IFR, a Thomson Reuters unit.

The yield on benchmark 10-year Treasurys note yield rose 8 basis points to 2.00 percent.

It approached the top end of its 21 basis-point trading range set after the Federal Reserve's policy meeting in March, when the Fed downgraded its economic outlook. The 30-year bond yield was 6.5 basis points higher at 2.677 percent.

The Fed opened its two-day policy meeting on Tuesday, and is scheduled to released its policy statement at 2 p.m. (1800 GMT) on Wednesday. On balance, domestic data has come in weaker-than-forecast, supporting bets the U.S. central bank might leave rates near zero into late 2015. On Tuesday, S&P/Case Shiller said its gauge on home prices in 20 U.S. cities grew 5.0 percent in February from a year ago, stronger than a forecast increase of 4.7 percent.

—CNBC's Evelyn Cheng contributed to this report.