As the latest in a string of inflation news, global yields jumped Tuesday after Germany's Federal Statistics Office reported that the country's producer prices came in hotter than anticipated. Germany's January producer price index rose 0.5 percent month-over-month and 2.1 percent year-over-year.
Economists polled by Reuters had expected German PPI to rise 0.3 percent on a monthly basis. The yield on the 10-year German bund rose to 0.738 percent following the report.
The Treasury Department auctioned $28 billion in 2-year notes at a high yield of 2.255 percent, its highest yield at auction since August 2008. The bid-to-cover ratio, an indicator of demand, was 2.72, its lowest since January 2017. Indirect bidders, which include major central banks, were awarded 46.3 percent. Direct bidders, which includes domestic money managers, bought 13.4 percent.
"The 2-year note auction was very mediocre," said Peter Boockvar, chief investment officer at Bleakley Advisory Group. "What is becoming increasingly clear is that the short end of the curve is realizing that the Fed is likely to follow through with its plan to hike three times in 2018."
Elsewhere, U.S. politics were on investors' minds. On Friday, the office of U.S. Special Counsel Robert Mueller indicted 13 Russian nations and three entities from Russia for alleged illegal interference in the 2016 presidential election.
The defendants allegedly conducted "information warfare" against the U.S. to "sow discord" into its political system through the use of fictitious personas and online platforms such as social media. The Kremlin has since said here was no significant evidence of meddling from Russia in the 2016 presidential election but provided no further information.
—CNBC's Dan Mangan and Mike Calia contributed to this report