Treasury Department auctions $21 billion of 10-year notes at a high yield of 2.535%


Yields rose on Wednesday, with benchmark and longer-dated yields rising the most, as traders absorbed a new supply of U.S. 10-year notes and continued to anticipate a more hawkish statement from the Federal Reserve next week.

The Treasury Department auctioned $21 billion in 10-year notes at a high yield of 2.535 percent, versus 2.439 percent in August. The bid-to-cover ratio, an indicator of demand, was 2.71, compared to 2.83 last month.

Indirect bidders, which include major central banks, were awarded 53.01 percent of the supply, their biggest slice since December 2011. Direct bidders, on the other hand, took home 13.47 percent, the group's smallest share since December.

Ten-year notes were last down 8/32 in price to yield 2.54 percent, a session high and its highest since August 1. Thirty-year bonds lost 23/32 in price, bringing the yield up to 3.27 percent.

Bond yields have risen in recent days—pressuring Wall Street—on fears the Federal Reserve could raise interest rates sooner rather than later. This came after fresh research from the San Francisco Fed suggested investors' expectations for rate hikes lagged those of the central bank.

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"Despite the weaker than expected labor market report, there remains grounds for some shift in communication on the outlook for monetary policy, especially given that quantitative easing (QE) tapering is close to an end," said Halpenny.

The Treasury Department will auction $13 billion in 30-year bonds on Thursday, the last of three debt sales this week.

—By CNBC staff. Reuters contributed to this report.