Bond prices extended earlier gains on Wednesday after the U.S. government's auction of five-year Treasury notes, the second of three debt auctions this week.
The Treasury Department auctioned $35 billion in five-year notes at a high yield of 1.715 percent. The bid-to-cover ratio, an indicator of demand, was 2.99, compared to a recent average of 2.60.
Traders expected the new notes to price at yields of 1.75 percent, according to trading in the "when issued'' market.
Benchmark 10-year Treasury notes — used to calculate mortgage rates and other consumer loans — rose 12/32 in price to yield 2.71 percent, down from Tuesday's close of 2.735 percent.
U.S. Treasurys gained momentum earlier on Wednesday as safe-haven buying on tensions with Russia competed with strong U.S. data that calmed fears about the economy.
U.S. durable goods logged a 2.2 percent jump in February, blowing past most estimates and fanning new speculation about the direction of the Federal Reserve's monetary policy. Bonds traced recent ranges, however, amid fears about the fallout from further sanctions against Russia.
Two- and five-year notes have been the worst performers since Federal Reserve Chair Janet Yellen said last Wednesday the U.S. central bank could raise interest rates six months after its current bond-buying program ends, suggesting a potential rate hike as early as spring of 2015.
Five-year notes were last up 8/32 price to yield 1.68 percent. The yields rose as high as 1.77 percent on Tuesday, the highest since January 9, and are up from around 1.54 percent before Yellen's comments a week ago.
The yield curve also edged higher as investors continued to unwind flattening trades that had sent the spread between five-year note yields and 30-year bond yields to the narrowest levels in over four years.
Stabilization of the notes at higher yield levels in recent days, however, may support the sale, said Justin Lederer, an interest rate strategist at Cantor Fitzgerald in New York. ``I think we've kind of found a comfort area,'' he said.
The U.S. government will sell $29 billion in seven-year notes on Thursday, its final sale of $96 billion in coupon-bearing supply this week.