10-year Treasury yield rebounds from 20-month lows

At around 2:40 p.m. ET, the yield on the benchmark 10-year Treasury note, which moves inversely to price, was higher at around 2.128%, while the yield on the 2-year yield climbed to 1.879%.

Yields climbed to session highs Tuesday following comments from Fed Chair Jerome Powell, who spoke from a conference in Chicago.

“We do not know how or when these issues will be resolved,” he said in prepared remarks. “We are closely monitoring the implications of these developments for the U.S. economic outlook and, as always, we will act as appropriate to sustain the expansion, with a strong labor market and inflation near our symmetric 2 percent objective.”

Powell’s comments follow those from St. Louis Federal Reserve president James Bullard, who said on Monday that a U.S. interest rate cut “may be warranted soon ” given the rising risk to economic growth posed by global trade tensions as well as weak U.S. inflation.

Despite the small bounce Tuesday morning, yields have swooned over the past month as renewed trade tensions between the U.S. and China sent investors into the Treasury market in search of safer securities. The 10-year rate is down about 40 basis points since the start of May.

Still, bond traders say the widely-watched 10-year yield could easily dip to 2% or below, after it touched 2.06% Monday, and J.P. Morgan Chase strategists say their target is now 1.75% for year end. That forecast came as a number of Wall Street firms, including J.P. Morgan and Barclays switched their view to two Fed rate cuts this year, from none previously.

— CNBC’s Patti Domm contributed to this report.