U.S. Treasury and eurozone yields fell Tuesday as investors pondered whether the recent bonds selloff had gone too far and now offers attractive levels to start buying again.

The 10-year Treasury yield declined to 5.269% from its Monday settlement of 5.310%, which was the highest since 2002, according to Tradeweb.

Yields took a step back from multidecade intraday highs reached last week, but remained elevated. An auction of three-year notes cleared at a yield of 4.932%, the highest for a tender of that maturity since May 2006, as investors demand higher returns to finance the government.

Yields remained lower even as oil prices reversed early losses and Brent stabilized around $100 a barrel.

The U.S. trade deficit widened more than expected in August, to $105.6 billion, potentially denting gross domestic product growth, according to Capital Economics.

Investors on Wednesday are likely to scrutinize minutes of the Federal Reserve's latest meeting, when the central bank raised interest rates for the first time in three years. Markets are pricing in 81% odds of a pause this month, followed by a hike in December, according to CME.

Meanwhile, French government bonds recovered after a sharp selloff due to recent budget concerns that took yields and their spreads against German peers to multiyear highs.

"Markets have had another volatile session over the last 24 hours, as investors grappled with European contagion risk and a fresh Treasury selloff," Deutsche Bank strategists said. "On the bright side, yesterday brought some initial signs that the pressure on France was stabilizing, with a clear outperformance in French debt."

The 10-year German Bund yield edged lower to 3.444% after settling Monday at 3.491%, according to LSEG. France's 10-year OAT slipped to 4.753% from 4.856%.

That said, bond yields globally remain elevated, as government spending, debt sustainability and inflation remain key concerns, largely due to steep rises in energy prices as a result of the U.S.-Iran war.

Regarding France, RBC Capital Markets analysts said that the passing of the 2027 budget doesn't necessarily secure fiscal sustainability.

"Beyond next year, France would need to deliver a similar pace of consolidation for four further years to achieve a 3% budget deficit by 2030--a pace no French government has sustained in the modern era," they said in a note.

This week sees less eurozone government bond supply, with no French auctions due.