NEW YORK (CNNMoney.com) - Treasury bonds tumbled Tuesday, sending yields sharply higher, as investors eyed a stronger-than-expected reading on inflation and remarks from Federal Reserve Chairman Ben Bernanke.

The movement in the Treasury market sparked another "inversion" of the yield curve, an unusual situation when short-term rates are higher than long-term rates, which has often signaled an economic slowdown, or even a recession, in the past.

The details See more

The dollar jumped against the euro and the yen.

The benchmark 10-year Treasury note sank 14/32 to 98-10/32 to yield about 4.72 percent, up from 4.66 late Monday.

The 30-year bond slipped 20/32 to 96-6/32, yielding 4.74 percent, up from 4.71 in the previous session. Bond prices and yields move in opposite directions.

The five-year note fell four ticks, yielding 4.65 percent, and the two-year note fell about 10 ticks, yielding 4.69 percent.

The yield on the two-year note rose to about 4.74 percent and the six-month yield was at about 4.81 percent.

While the government's Producer Price Index fell 1.4 percent last month -- a bigger drop than Wall Street had expected -- the so-called "core" rate excluding food and energy rose 0.3 percent, a larger jump than economists had forecast. (Full story.)

The jump in the core rate spooked investors worried about a possible pickup in inflation -- and higher rates. The Fed has been raising rates for more than one and a half years in a bid to ward off inflation. Bond investors hate inflation since it erodes the value of their investments.

Meanwhile on Monday, Federal Reserve Chairman Ben Bernanke ran through several competing explanations for the unusually low level of U.S. bond yields -- particularly long-term yields -- despite a steady ratcheting up of short-term interest rates by the U.S. central bank. (Full story.)

Bernanke also argued that even an expected decline in the housing sector would not sufficiently hurt consumption enough to derail the country's solid economic growth, Reuters reported.

"There was a pent-up desire to (sell bonds) that was not implemented ahead of Bernanke because that was seen as a big risk event," Bernd Wuebben, senior market strategist at BNP Paribas, told the news agency. "Bernanke has, if anything, reinforced that sentiment."

In currency trading, the euro bought $1.21, down from $1.2167 late Monday, while the dollar rose to ¥117.15 from ¥116.33 the previous session.

______________

Ben Bernanke is 'quite concerned' about the budget deficit. Full story.

Interest rates are the highest in years, making housing markets more overvalued. 299 markets tracked.