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Treasury Department auctions $29 billion of 7-year notes at a high yield of 2.018%

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The Treasury Department auctioned $29 billion in seven-year at a high yield of 2.018 percent, the lowest since May. The bid-to-cover ratio, an indicator of demand, was the weakest since November at 2.42.

Indirect bidders, which include major central banks, were awarded 46.6 percent, above the 45 percent recent average.

Direct bidders, which includes domestic money managers, brought 15.4 percent, compared to a recent average of 20 percent.

Prices for benchmark 10-year Treasury notes rose 3/32 to yield 2.31 percent on Thursday late morning, down from a three-week peak of around 2.36 percent on Wednesday after the Federal Reserve announced the end of quantitative easing. Prices and yields are inversely related.

The 30-year bond price rose 8/32 in price to yield 3.04 percent.

U.S. Treasury yields fell earlier, after rising for two straight sessions, with the yield curve steepening as shorter-dated Treasury notes declined by more than those with longer maturities.

Bond yields sank to session lows after a report showed U.S. growth was boosted in the third quarter by a surge in defense spending and a narrower trade deficit. A separate reading showed first-time claims for state unemployment benefits rose.

"It's a beat, but GDP was propped up by defense spending," said Tom di Galoma, head of rates and credit trading at ED&F Man in New York.

"I still think the Fed is still a ways away from raising rates. The Fed will continue to drag its feet, not tighten, even though people think the Fed is ready to tighten."

Read MoreUS shows torridgrowth, boosted by defense, trade

The Fed reiterated that benchmark interest rates would remain near zero for a considerable period of time. However, it also upgraded its outlook for the labor market, which some analysts took as a sign that the central bank was gearing up for a rate rise.

"In the absence of a major deterioration in macro or financial conditions, today's statement primes the market for further hawkish guidance at the next FOMC meeting," said Erik Weisman, a fund manager at MFS Investment Management.

Reuters contributed to this report.