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US Treasury yields continue rebound as global trade concerns ease

U.S. government debt yields added to a recent rebound on Tuesday as fears over global trade tensions paused and investors looked toward riskier assets.

U.S. Markets Overview: Treasurys chart

At around 1:25 p.m. ET, the yield on the benchmark 10-year Treasury note rose to 2.145% while the yield on the 2-year note climbed to 1.926%. Bond yields move inversely to prices.

The recent uptick in yields comes after President Donald Trump said 5% levies all Mexican imports into the U.S. would be suspended indefinitely. He added he had "full confidence" in Mexico's ability to crack down on immigration from Central America.

Wall Street also got a lift from increasing expectations of lower rates from the Fed.

Though market participants grew concerned over a deteriorating economic outlook throughout the month of May amid renewed trade barbs between the U.S. and its economic partners, U.S. Treasury Secretary Steven Mnuchin disputed that interpretation in an interview with CNBC on Monday.

Mnuchin said falling bond yields, rather than warning of a recession, should be viewed as a sign that the Federal Reserve would cut interest rates over the coming months. Bond yields fell to 20-month lows last week after government data showed U.S. job creation slowed more than expected in May.

Investor expectations of a June rate cut from the Fed rose last week to 27.5%, according to the CME Group's FedWatch tool. The market gives a 79% chance of a Fed rate cut in July.

The Labor Department said in a report Tuesday that business prices inched higher in May, the latest data to suggest anemic inflation in the United States. The producer-price index, a gauge of prices businesses receive for their goods, rose a seasonally adjusted 0.1% in May from a month earlier.

Barring the volatile food and energy components, the so-called core PPI rose 0.2% as expected.

The Treasury Department auctioned $38 billion in 3-year notes at a high yield of 1.861%. The bid-to-cover ratio, an indicator of demand, was 2.62. Indirect bidders, which include major central banks, were awarded 56.6%. Direct bidders, which includes domestic money managers, bought 13.4%.

— CNBC's Michael Sheetz contributed to this report.