US Treasury yields higher on Powell's second day of testimony

U.S. government debt yields rose on Wednesday amid Federal Reserve Chairman Jerome Powell's second day of testimony on Capitol Hill.

At 11:40 a.m. ET, the yield on the benchmark 10-year Treasury note was up 5 basis points at 2.682 percent, while the yield on the 30-year Treasury bond was up 5 basis points at 3.06 percent. The 10-year yield hit a fresh high of session of 2.684 percent, its highest level since Feb. 25.

Bond yields, which rise as prices fall, moved steadily upward throughout the morning despite what some analysts deemed as dovish commentary from the Fed chief. Tom di Galoma, head of Treasury trading at Seaport Global Holdings, attributed the sharp moves higher in long-term yields to significant corporate issuance in the U.S. as well as a wave of debt selling in Europe.

"We had a real underperformance of the entire European government bond complex which I think spread over to the U.S. market in a way that really just forced rates higher," di Galoma told CNBC. "And then with that you started to see all these corporate deals being announced."

"We're in a monthly business where people need to have a certain amount of returns. I think people got caught on the long side," he added.

The European Commission on Wednesday admonished Italian lawmakers, saying the country's huge public debt and long-lasting productivity softness represent a risk to its neighbors. Though the Commission didn't use the word "contagion," it did mention how Rome's fiscal decisions could impact other European nations if its debt-to-GDP ratio does not decline.

"Italy is experiencing excessive imbalances," the Commission said Wednesday in its annual assessment of the economic and social situation in EU member states. "High government debt and protracted weak productivity dynamics imply risks with cross-border relevance."

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On Capitol Hill, Fed Chair Powell began addressing the House Committee on Financial Services at 10 a.m. ET. Speaking on Tuesday, Powell said it is "beyond consideration" for the U.S. not to repay all of its debt. The remarks come at a time when Congress battles with a higher level of spending.

In a prepared statement, Fed ChairPowell told lawmakers Tuesday that while the U.S. economy looks strong, there are some worrying signs on the horizon.

"While we view current economic conditions as healthy and the economic outlook as favorable, over the past few months we have seen some crosscurrents and conflicting signals," Powell said in his prepared remarks to the Senate Committee on Banking, Housing and Urban Affairs. "Financial markets became more volatile toward year-end, and financial conditions are now less supportive of growth than they were earlier last year."

In October, Powell said the central bank was "a long way" from a neutral overnight lending rate, and in December commented that the process of reducing the balance sheet was on "autopilot." Those comments appeared to spook the markets throughout the final month of 2018 until the Fed chair and others soften their stance and suggested a more data-dependent path forward.

"Powell didn't really shed any light on the balance sheet, which is the big area of focus for the marketplace," Seaport's di Galoma added. "I'd say that he's given somewhat of dovish testimony in terms of being patient and watching the economy, but he could turn the green light on again [on rate hikes]."

Investors are also paying close attention to an upcoming meeting between the leaders of North Korea and the U.S.

— CNBC's Silvia Amaro contributed reporting.