NEW YORK - U.S. Treasury yields rose on Tuesday, with the short end of the curve rising above the long end, in anticipation of the Federal Reserve's plans to aggressively raise interest rates to stamp out inflation.

But the inflation outlook remains unresolved, leading many investors to also see a sharp economic slowdown or recession as the Fed's tightening makes loans too costly for many companies.

In a sign of the U.S. economy's tough road ahead, the Conference Board's Expectations Index that shows consumers' short-term outlook for income, business and labor market conditions, fell to its lowest level since March 2013. The index decreased sharply to 66.4 from 73.7.

"Most investors are accepting the fact that the economy is going to have a hard landing," said David Petrosinelli, senior trader at InspereX. "It's a continued lack of confidence in the Fed being able to engineer it. People have accepted the fact the Fed has to break demand before we can break prices."

The yield on 10-year Treasury notes rose 3.2 basis points to 3.226%. The yield on two-year notes, which can herald interest rate expectations, advanced 2.1 basis points at 3.132%.

Yields on three-, five- and seven-year notes were higher than the benchmark 10-year, trading at 3.232%, 3.277% and 3.298%, respectfully. The yield on the 30-year Treasury bond rose 3.3 basis points to 3.338%. The Treasury will sell $40 billion of seven-year notes at 1 p.m. (1700 GMT).

The auction of $93 billion in two- and five-year notes on Monday was weak before the quarter ends on Thursday. A closely watched part of the Treasury yield curve measuring the gap between yields on two- and 10-year notes, a sign of economic expectations, was at 9.2 basis points.

The gap earlier briefly spiked down to -7.24 when New York trade opened. The breakeven rate on five-year U.S. Treasury Inflation-Protected Securities (TIPS) was last at 2.803%.

The 10-year TIPS breakeven rate was last at 2.529%, indicating the market sees inflation averaging about 2.6% a year for the next decade. The U.S. dollar five-year forward inflation-linked swap was last at 2.539%. 

(Reporting by Herbert Lash; editing by David Evans)