Benchmark 10-year notes last fell 17/32 in price to yield 3.0576%, from 2.995% late on Monday.
The dollar inched up against a basket of currencies on Tuesday from its lowest level in more than a week as hopes for an easing of global trade tensions pushed US bond yields higher. Other data showed factory activity regaining momentum in May.
"The only thing I can really see right now is the. interest rate differential", Innes said.
The data indicated consumer spending is stronger than expected by the market, said Jon Mackay, investment strategist at Schroders North America in NY.
The yield, a barometer for mortgage rates and other financial instruments, has jumped recently on signs of rising inflation, which sparked market speculation for more rate-hikes later this year.
The 10-year Treasury yield had hovered around 3 per cent since late last month on concerns about rising inflation and a ballooning federal budget gap.
"It's taken some time to get through it and this is kind of that breakout day", said Willie Delwiche, investment strategist at Baird in Milwaukee.
The dollar index versus a basket of six major peers stood at 93.270 after rallying to 93.457 overnight, its highest since December 22.
On Wall Street, the Dow Jones Industrial Average fell 197.2 points, or 0.79%, to 24,702.21, the S&P 500 lost 19.78 points, or 0.72%, to 2,710.35, and the Nasdaq Composite dropped 73.24 points, or 0.99%, to 7,338.08.
"The reason why the equity market is falling today is because we are once again pondering if the strength of the USA economy is enough to make the Fed raise faster in the future", said Brent Schutte, chief investment strategist at Northwestern Mutual Wealth Management Co in Milwaukee, Wisconsin.
After improved trade sentiment helped stocks on Monday, equities were again jostled by developments involving US-China talks.
Analysts pointed out the possible relaxation of trade tensions between China and the United States has helped to boost U.S. Treasury yields, supporting the currency market. It traded at 57.90 euro cents from 57.95 cents yesterday and at 4.3752 yuan from 4.3742 yuan.
Home Depot shares fell 1.7% after the home improvement chain missed Wall Street's sales forecast.
The pan-European FTSEurofirst 300 index .FTEU3 rose 0.14 percent.
The greenback's rally, which has seen the dollar claw back most of its 2018 losses after a reassessment of the path of USA monetary policy versus other countries, came to a halt last week following disappointing US inflation numbers.
The Norwegian crown rose 0.3 percent versus the euro to 9.56 crowns after strong quarterly economic data raised expectations of a rate rise later this year.
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