10-year Treasury yield tops 3.44%, the highest level in 11 years

Treasury yields jumped on Tuesday as investors continued to assess the prospect of the Federal Reserve taking the most aggressive step yet in its fight to lower soaring inflation.

The yield on the benchmark 10-year Treasury note was last up 7 basis points to 3.44% and trading near session highs, after hitting its highest level since 2011. The 2-year yield rose 14 basis points to 3.425% while the 30-year Treasury bond was last up 5 basis points to 3.423%. Yields move inversely to prices, and a basis point is equal to 0.01%.

Fresh U.S. inflation data was also released on Tuesday, with the government reporting that wholesale prices rose 10.8% in May. That's near a record.

The moves came after the 10-year notched its biggest move since 2020 in the previous session. The 2-year and 10-year Treasury yield curve on Monday briefly inverted for the first time since early April as investors braced for the prospect of aggressive monetary policy tightening to lower inflation. This measure is closely monitored by traders and is often seen as an indicator of a recession.

Tuesday's swings come after an intense sell-off during the regular session on Wall Street as market participants await the start of the Federal Reserve's two-day policy meeting, which concludes on Wednesday.

"The move in the 10-year Treasury yield toward 3.5% shows the market's fear that the Fed may fall further behind the curve is increasing. In turn, this will give the Fed less room to 'declare victory' and ease off on rate hikes," said Mark Haefele, chief investment officer at UBS Global Wealth Management.

"As a result, the risks of a Fed-induced recession have increased, in our view, and the chances of a recession in the next six months have risen," Haefele added.

Investors are bracing themselves for a 75 basis-point hike from the Fed this week, rather than a 50 basis-point hike many had come to expect. That's because last week's inflation report showed prices running hotter than expected.

The Federal Open Market Committee in May raised the target range for the federal funds rate to 0.75% to 1% from 0.25% to 0.5%.

— CNBC's Sarah Min contributed to this report.