By William Watts and Mark DeCambre, MarketWatch

Treasury prices edged higher Wednesday, nudging yields lower, as selling pressure abated alongside rising concerns over the fate of a planned summit between the U.S. and North Korea and jitters over the policy agenda of a putative new government in Italy.

A day earlier, the yield on the 10-year Treasury note hit a nearly seven-year high.

How are Treasurys performing?

The 10-year Treasury note yield edged 0.3 basis point lower to 3.073%, a day after registering the largest single-day climb since March 1, according to WSJ Market Data Group. The yield hit an intraday peak above 3.09% Tuesday. Yields and debt prices move in opposite directions.

The 30-year bond yield fell 1.4 basis points to 3.193%, after the long bond marked its largest daily yield climb since Feb. 2 in the previous session. The short-dated 2-year note yield , meanwhile, edged 0.8 basis point lower to 2.577%.

What's driving the market?

Investors watched events in Asia, with North Korea's threat to pull out of a summit planned for next month with the U.S. sparking worries that a brief detente between Pyongyang and Washington may be near an end.

Read:North Korea threatens to call off U.S. summit if Washington insists on denuclearization (http://www.marketwatch.com/story/north-korea-threatens-to-call-off-us-summit-if-washington-insists-on-denuclearization-2018-05-16)

Italian government bond yields jumped after a report said antiestablishment parties in talks to form a government would ask the European Central Bank to write off 250 billion euros ($296 billion) in debt (http://www.marketwatch.com/story/italian-markets-spooked-as-radical-agenda-from-5-star-league-fuels-fears-of-new-crisis-2018-05-16) and seek to renegotiate Rome's contribution to the European Union budget.

While the Treasury selloff paused, the steady climb in government bond yields has been a focus for fixed-income investors. Concerns about rising inflation, a factor that can erode a bond's fixed value, fueled by signs that prices are rising and the Fed may feel compelled to increase rates twice more in 2018, if not thrice more, has pressured bond prices lower, and pushed yields up.

Market participants are slowly converging around the idea that rates may hit 3.5% or 4% at some point this year, with that expectation underpinned by indicators that support the thesis of an economy that is on a firm footing.

What are strategists saying?

"The U.S. 10-year yield [temporarily] rose above 3.07% key resistance, but the test is ongoing," wrote analysts at KBC Bank, in a Wednesday note. "The same goes for the test of 3.22% in the 30-year yield."

"Treasury yields broke out above late April highs yesterday, and as seen in monthly charts below, this had even bigger implications for the longer-term trend channel. No countertrend evidence of exhaustion was present, so near-term yield pullbacks would represent a chance to sell Treasurys, expecting higher yields into late May/early June before any peak," wrote Mark Newton, technical analyst at Newton Advisors in a Wednesday research note.

What data and Fed speakers are in focus?

Construction on new houses in the U.S. fell 3.7% in April (http://www.marketwatch.com/story/housing-starts-drop-37-in-april-but-stick-near-11-year-high-2018-05-16), with the annual rate falling to 1.29 million homes, in line with forecasts.

Atlanta Federal Reserve President Raphael Bostic was due to address the economic outlook at Georgia's Augusta Cotton Exchange.

The Federal Reserve said industrial production rose 0.7% in April (http://www.marketwatch.com/story/industrial-output-climbs-07-in-april-2018-05-16), slightly stronger than Wall Street expectations for a 0.6% rise. A mix of revisions to the previous two months were net negative but still saw output grow at a 2.3% rate in the first quarter.

Check out:MarketWatch's Economic Calendar (http://www.marketwatch.com/economy-politics/calendars/economic)

What are other assets doing?

The yield on the 10-year Italian government bond jumped 12.5 bass points to 2.076% following the report on the potential coalition government's draft plans to call for debt forgiveness.

The 10-year German bond yield fell 3.25 basis points to 0616%, compared with 0.634% in the previous session. The German bond, or bund, is viewed as the eurozone's risk-free security.

The gap between 10-year German and U.S. yields stands at about 2.46 percentage points, which is around its widest in about three years.

(END) Dow Jones Newswires

May 16, 2018 10:51 ET (14:51 GMT)