Treasury yields ticked higher Tuesday even after commentary from Federal Reserve Chairman Jerome Powell suggested that the central bank is making headway in its efforts to tamp down inflation.
Yields briefly fell as Powell indicated that the disinflationary process was underway, but reversed course as he suggested that the Fed may still need to hike more aggressively.
"The reality is we're going to react to the data," Powell said during an appearance before the Economic Club of Washington. "So if we continue to get, for example, strong labor market reports or higher inflation reports, it may well be the case that we have do more and raise rates more than is priced in."
The yield on the 10-year Treasury was last trading at 3.69% after rising by roughly 6 basis points. The 2-year Treasury yield was last up by around 2 basis points at 4.477%.
Prices and yields move in opposite directions. One basis point equals 0.01%.
Earlier in his appearance, Powell said 2023 should see "significant declines" in inflation, but more work is necessary to get the job done, and it could take until next year to bring inflation closer to the Fed's 2% goal.
"The disinflationary process, the process of getting inflation down, has begun and its begun in the goods sector," he said. "But it has a long way to go. These are the very early stages of disinflation."
The comments from Powell come after the central bank chair said during a post-rate hike press conference that disinflation had begun. Investors interpreted those comments as dovish, which fueled a rally in the market.
His remarks followed an appearance from Minneapolis Fed President Neel Kashkari. He told CNBC's "Squawk Box" on Tuesday that it's too early for the central bank to "declare victory" on inflation.
"We need to raise rates aggressively to put a ceiling on inflation, then let monetary policy work its way through the economy," he said.