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Treasury Department auctions $21 billion of 10-year notes at a high yield of 2.139%

U.S. Markets Overview: Treasurys chart

Bonds turned higher on Wednesday as the U.S. government's auction of 10-year Treasury notes meet average demand.

The Treasury Department auctioned $21 billion in 10-year notes at a high yield of 2.139 percent, better than February's 2.000 percent. The bid-to-cover ratio, an indicator of demand, was the highest since December at 2.65. That figure was lower than the recent average of 2.69.

Yields on the benchmark 10-year note were last flat at 2.133 percent, coming off a two-day price rally.

Indirect bidders, which include major central banks, were awarded 58.6 percent, well above the 48 percent average. Direct bidders, which includes domestic money managers, brought 10.2 percent, versus a recent average of 13 percent.

U.S. Treasurys prices mostly eased on Wednesday, with some maturities seeing yields rise for the first time since European central bankers early this week began massive bond-buying that boosts the relative value of American debt.

On Wednesday, euro zone bond yields fell as the European Central Bank bought government debt across the currency union at a rate matching its trillion-euro commitment over 1-1/2 years.

In contrast, yields on the benchmark 10-year note were last at 2.1368 percent, reflecting a price decline of 2/32, coming off a two-day price rally, according to Thomson Reuters data.

The 30-year note yield was last down 1 basis point to 2.706 percent after recouping losses and earlier yielding as much as 2.745 percent.

Investors expect rates to rise as the U.S. Federal Reserve readies for interest-rate increases later this year. The Fed meets next week, and may remove a phrase saying it plans on being "patient" with changes in policy as a precursor to shifting rates, possibly as soon as June.

Shorter-maturity Treasurys, which would be most affected by a Fed shift away from near-zero interest rates, were mostly off 1 or 2 basis points.

The three-year note last yielded 1.11 percent, up 1 basis point.

"The short end of the curve - the two-year, the three-year, the five-year - is becoming more pensive about a sooner-than-expected rate hike," Stith said. "There's a lot of volatility in the market and we expect that to continue until the Fed acts."

Heavy bond-buying in Europe, however, could continue to drive investors to the more favorable yields in U.S. debt. The 10-year note yields 193 basis points more than the benchmark 10-year German bund, one of many euro zone issues plumbing record lows because of the European Central Bank's 1.1 trillion euro bond-buying program, which began on Monday.

Treasury officials are scheduled to hold a $13 billion sale of 30-year bonds on Thursday.