Treasury Department auctions $21 billion of 10-year notes at a high yield of 2.214%

US 10-YR
US 30-YR

U.S. bond prices rose modestly on Wednesday, lifted by the government's strong sale of 10-year notes, the second of three debt auctions this week.

The Treasury Department auctioned $21 billion in 10-year notes at a high yield of 2.214 percent, the lowest yield since June 2013.

The bid-to-cover ratio, an indicator of demand, was the strongest since March 2013 at 2.97. Primary dealers, which includes major central banks, brought 39.30 percent of the supply, while direct bidders took 6.88 percent.

Yields on benchmark 10-year notes were at 2.20 percent after the announcement, up 4/32 in price. That compares to yields of 0.69 percent for comparable German government debt, which fell to record lows on Wednesday.

Thirty-year bond yields were last at 2.86 percent, up 4/32 in price. The Treasury yield curve steepened slightly but held near its flattest in six years as investors bet that the recent strong U.S. jobs report for November will keep the Federal Reserve on course to raise interest rates next year.

Besides the $21 billion in reopened 10-year notes due to be sold on Wednesday, the Treasury will sell $13 billion in 30-year bonds on Thursday. It sold $25 billion in 3-year notes on Tuesday.

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Treasurys have gained this week as concerns about falling oil prices and slowing global growth added a safety bid to the debt. A hunt for higher yields also has led many investors to reach out to longer-dated Treasurys, with few alternatives for high-quality bonds, a factor that is likely to help this week's auctions.

"I'm not quite so sure that demand is going to be as strong as what it might have been at a little bit lower levels, but given the positive outlook for inflation and demand for U.S. debt compared to other global sovereign yields, I would suspect that the auctions should go well," said Mary Ann Hurley, vice president of trading at D.A. Davidson Co. in Seattle.

Slowing global growth and political uncertainty in Greece are offsetting yield increases that would normally be expected as the U.S. economy strengthens. Greek stocks and bonds fell, with short-term yields rising above long-term yields, ahead of next week's presidential vote, pushing the borrowing costs of all peripheral euro zone governments higher.

Greek Prime Minister Antonis Samaras moved the country's presidential election forward by two months, a gamble that threatens to trigger an early parliamentary election and catapult the leftist anti-bailout Syriza party to power.