U.S. Treasury bonds declined on Tuesday, with a selloff that pushed the 30-year yield to its highest level since 2007 largely holding, driving yields up by 6 to 9 basis points across the curve. Led by intermediate-term bonds, short-term yields reached new highs for the year, causing the 5s30s spread to narrow by more than 3 basis points. Price volatility in early trading appeared exacerbated by several large block trades in 5-year and 10-year Treasury futures contracts.

Shortly after 3:00 PM New York time, the 30-year Treasury yield remained up nearly 6 basis points at 5.18%, after earlier touching 5.195%. The 5-year yield held a gain of nearly 9 basis points at 4.32%, after reaching 4.35%. The 10-year yield peaked at 4.685% before retreating to around 4.665% near the close.

The bond selloff accelerated in early trading when the 10-year Treasury futures contract broke below Monday's intraday low, triggering a surge in volume. Multiple large sell orders in 5-year and 10-year Treasury futures further intensified the decline.

The selloff in short-term bonds is linked to a hawkish shift in expectations for Federal Reserve policy. Swap contracts indicate market pricing for approximately 20 basis points of Fed rate hikes by year-end, equivalent to about an 80% probability of a 25-basis-point increase. The market has fully priced in a 25-basis-point hike by January, earlier than previously anticipated.

By 3:00 PM, trading volume in Treasury futures was about 45% above the 20-day average, concentrated primarily in 10-year contracts, where volume was roughly 65% above average.

As of 4:17 PM Eastern Time, the 2-year Treasury yield was 4.1055%, the 5-year yield was 4.312%, the 10-year yield was 4.6553%, and the 30-year yield was 5.1711%. The spread between 5-year and 30-year yields stood at 85.73 basis points, while the 2-year to 10-year spread was 54.65 basis points.