The Treasury sold $29 billion in seven-year notes to solid demand, the last of this week's $99 billion in coupon-bearing supply of nominal debt. It will also sell $14 billion in five-year Treasurys Inflation-Protected Securities on Thursday.
"In general you've seen markets got a little bit extended. We've moved to the bottom of the range," said Tom Tucci, head of Treasurys trading at CIBC in New York.
The Treasury's seven-year note auction was again dominated by larger purchases made from investors that can buy directly from the government, instead of being required to purchase through dealers.
Direct bidders bought 23.1 percent of the sale, the largest ever for a seven-year auction. Dealers bought 37 percent of the notes, the lowest since December 2010, and indirect bidders bought 39.9 percent.
The notes priced at a high yield of 1.23 percent, the same level where the notes had traded before the sale.
Fed bond purchases as part of its Operation Twist program also helped longer-dated debt. The Fed bought $1.89 billion in bonds due 2016 to 2042 on Wednesday. Year-end demand for lower- risk assets also spurred some buying.
"The longer end of the Treasury market got a little cheap, and people just started coming in and buying them," said Wilmer Stith, portfolio manager at the Wilmington Broad Market Fund in Baltimore. "They're trying to make sure any cash they have before year-end is put to work."
The Fed will also buy between $1.5 billion and $2.25 billion in notes due 2023 to 2031 on Thursday and the same amount in bonds due from 2036 to 2042 on Friday.
Investors remain focused on the "fiscal cliff," with talks on avoiding the automatic tax hikes and spending cuts that are set to take effect in the new year at a standstill.
A resolution of the issue would likely be good for the economy and negative for Treasurys, which have also benefited from a safety bid relating to uncertainty on the issue.
Ten-year notes were last up 5/32 in price to yield 1.80 percent, down from 1.82 percent late on Tuesday.
Thirty-year bonds rose 9/32 in price to yield 2.98 percent, down from 3.00 percent.