By Min Zeng 

The bond market barely budged even as U.S. stocks hit fresh record highs on Tuesday.

Bond yields had risen earlier in the session, driven by solid data out of the eurozone that pointed to improved growth outlook, which sapped demand for haven debt. Looming new Treasury debt supply also weighed down bond prices.

After rising to 2.461% earlier in the session, the yield on the benchmark 10-year Treasury note was recently at 2.434%, according to Tradeweb. The yield was 2.425% Friday.

Yields rise as bond prices fall. The U.S. bond market was closed Monday in observance of the Presidents Day holiday.

The 10-year Treasury yield has been trading between 2.3% and 2.6% since mid-December even as U.S. stocks have extended their rally since the U.S. Election. On Tuesday, the Dow Jones Industrial Average and the S&P 500 rose to a record.

Higher stock prices reflect a brighter sentiment toward the U.S. growth and corporate earnings outlook amid the prospect of expansive fiscal policy from the Trump administration. Yet analysts say the bond market suggests some caution regarding the details of President Donald Trump's proposals of lower taxes and large infrastructure investments and their effect on the broader economy.

Political risks in Europe, including the presidential race in France, also supported the bond market, analysts say.

Investors continue to cut exposure to French government bonds, driving the yield premium to hold the two-year French government bond relative to the two-year German government bond to the highest since 2012.

"The French elections are becoming an increasing concern as we see from increasing French government yields," said Christopher Sullivan, chief investment officer at the United Nations Federal Credit Union. "This uncertainty is likely restraining U.S. yields to a degree."

Reflecting the crosscurrents in the bond market, hedge funds accumulated a net $22 billion worth of bets on lower prices for 10-year Treasury futures for the week ended Feb. 14, according to TD Securities.

Meanwhile, asset managers raised bets on the opposite -- higher prices for 10-year Treasury futures. The net value of their wagers was $24 billion for the week ended Feb. 7, according to TD Securities.

The release of minutes from the Jan. 31-Feb. 1 meeting of the Federal Reserve's policy-making committee is due Wednesday afternoon. Investors will zero in on clues about the Fed's timing for the next interest rate increase.

The Fed raised its short-term interest rates in December for the second time since 2006. Higher interest rates from the central bank tightens money flowing into the banking system and typically ripple into market interest rates and shrink the value of outstanding bonds.

Over the past week, a number of officials including Fed Chairwoman Janet Yellen have signaled that a rate increase could come as soon as next month. Federal Reserve Bank of Philadelphia President Patrick Harker said he wouldn't "take March off the table" in an interview Friday with Market News International.

The yield on the two-year note, highly sensitive to the Fed's policy outlook, was 1.211% Tuesday. It was near its Dec. 15 settlement of 1.261%, which was the highest close since August 2009.

Fed-funds futures, used by investors to wager on the Fed's interest-rate policy outlook, showed Tuesday 22% odds for the Fed to raise rates by its March 14-15 meeting, according to data from the CME Group. The odds were around 13% a week ago.

Analysts say the level suggests many investors aren't convinced that the Fed could pull the trigger so soon, citing uncertainty surrounding the U.S. fiscal policy outlook. Some say political risks in Europe are also likely to keep the Fed on hold until the summer.

The odds for the Fed to raise rates by its May meeting were 47% and the odds by its June meeting were 71%.

Write to Min Zeng at min.zeng@wsj.com

(END) Dow Jones Newswires

February 21, 2017 11:54 ET (16:54 GMT)