U.S. Treasury yields fell on Tuesday, continuing recent weakness even as the nation's economy shows signs of recovery and rising inflation.
Treasury yields trimmed some of their losses in late morning trading after Treasury Secretary Janet Yellen said that interest rates may need to "rise somewhat" to keep the economy from overheating as the U.S. recovers from the coronavirus pandemic.
Tuesday's move marks the third straight trading day of declines for yields, which have struggled to regain their highs from earlier this year. Yields rose aggressively at the start of 2021, and peaked above 1.7% in March.
"I think part of it is just a risk-off move. The tech market is selling off and so what you see is a bit of a bid in the bond market, and the long-end of the market, which is pretty typical of risk-off environments," said Kathy Jones, chief fixed income strategist at Charles Schwab.
However, despite signs of an economic recovery and inflation, Federal Reserve officials have reiterated their commitment to holding down their benchmark interest rate for the foreseeable future. Short-term rates were moving slightly higher on Tuesday.
"Long rates remained anchored, but ... near term 1-forward rates and term premiums are creeping higher. So pricing in a faster pace of Fed tightening than what the Fed is [outlining]," Evercore ISI's Dennis DeBusschere said in a note.
Florida Gov. Ron DeSantis signed an executive order on Monday that immediately suspends the state's remaining Covid-19 public health restrictions. Meanwhile, New York, New Jersey and Connecticut will start to lift capacity restrictions on May 19.
Factory orders rose 1.1% in March, the Census Bureau said Tuesday. The February decline for the metric was also revised to a smaller 0.5% fall.
An auction was held Tuesday for $40 billion of 42-day bills.
— CNBC's Lauren Thomas and Thomas Franck contributed to this report.