The 10-year Treasury yield retreats from its 3-year peak following the unexpectedly lower core CPI reading.

On Tuesday, the 10-year U.S. Treasury yield decreased from a three-year peak due to investors' assessment of the latest inflation data.

The benchmark yield dropped by 6 basis points to 2.721% after reaching its highest point of 2.82% since December 2018 earlier in the session. The yield on the also decreased by 1 basis point to 2.811%.

The consumer price index, which measures a wide range of goods and services, increased by 8.5% from the previous year on an unadjusted basis, slightly higher than the Dow Jones forecast of 8.4%.

Despite the increase in core CPI, excluding food and energy, which rose 6.5% year over year, investors remained optimistic due to the expectation. Month to month, core CPI increased by 0.3%, which was lighter than the anticipated 0.5%.

The Federal Reserve's monetary policy tightening will be determined by the inflation readings.

The Federal Reserve is set to increase interest rates by half a percentage point in May and allow their bond portfolio to run off due to the concerning trend of inflation, as stated by Greg McBride, chief financial analyst at Bankrate. The Fed will take a firm stance on reducing demand and lowering the inflation rate.

The inversion of bond yields has caused investor fears of a recession, as they have been selling out of shorter-dated Treasurys in favor of longer-dated debt, despite rates reverting on Tuesday.

Nigel Bolton, co-chief investment officer at BlackRock Fundamental Equities, stated on CNBC's "Squawk Box Europe" on Tuesday that the increased market volatility is due to worries about central banks making "policy mistakes" that could lead to a global recession within the next 12 to 18 months.

Bolton stated that he believed a recession was not imminent.

— Samantha Subin and Yun Li contributed to this market report.