The 10-year U.S. Treasury yield slipped below 3% on Wednesday after a release of key inflation data showed a faster-than-expected rise in prices.

The yield on the benchmark 10-year Treasury note rose above 3% following the report before settling down 6 basis points to 2.93%. The 30-year Treasury bond dropped nearly 9 basis points to 3.042%. Yields move inversely to prices and 1 basis point is equal to 0.01%.

April's consumer price index, a key measure of inflation, rose 0.3% month over month and 8.3% year over year. Economists expect the CPI to rise 0.2% from the month prior and 8.1% year over year, according to the Dow Jones consensus estimate. That compares with March's 8.5% year-over-year pace.

Core CPI, which strips out volatile food and energy prices, saw an even bigger month-over-month jump of 0.6%. Economists surveyed by Dow Jones were expecting a 0.4% rise.

"Confirmation of a peak in annual inflation after the seemingly never-ending upward path could be welcomed by markets. But more likely, markets will be dismayed - this is another upward inflation surprise and suggests that the deceleration is going to be painstakingly slow," said Seema Shah, chief strategist at Principal Global Investors. "The focus will soon start shifting from where inflation peaked to where it plateaus, and we fear that it will plateau at an uncomfortably high level for the Fed."

The inflation reading is important given that this data is largely determining the Federal Reserve's direction on raising interest rates. Both pricing pressures and more aggressive rate hiking have fueled concerns about a slowdown in economic growth.

Madison Faller, global market strategist at JPMorgan Private Bank, told CNBC's "Squawk Box Europe" on Wednesday that she believes that Fed policy is "having its intended effect in removing some of the pressure and slowing things down."

Faller said the Fed is trying to quell some of the demand that's helping drive inflation.

She believes that the slowdown in demand is already being reflected in the housing sector, as new 30-year mortgage rates have "skyrocketed" to 5.5%.

"That's really meaningful considering the housing market is the most cyclical part of the U.S. economy — 65% of Americans own a home and that tells us that the Fed is already doing its job," she said.

"But what that also tells us is that forward trajectory for interest rates from here might be capped as you have that negative economic feedback loop," Faller added.

Investors also continue to focus on the the conflict in Ukraine and Covid-19 lockdowns in China.

— CNBC's Hannah Miao contributed to this market report.