Bond yields turned flat on Tuesday after the U.S. government's auction of two-year Treasury notes, the first batch of this week's offering of new debt supply, met below-average demand.
The Treasury Department auctioned $26 billion in two-year notes at a high yield of 0.692 percent. The bid-to-cover ratio, an indicator of demand, was 3.38, below the recent average of 3.44.
The two-year note yield was up slightly at 0.68 percent, compared to 0.66 moments before the announcement. The benchmark 10-year yield was higher at about 2.41 percent—up from 2.36 percent in New York trade on Monday.
Prices slipped earlier after Federal Reserve Governor Jerome Powell said the central bank could raise interest rates in September, while persisting optimism for a Greek debt deal also weighed on prices.
Powell said the U.S. economy could be ready for a first interest rate hike in September followed by a second increase in December and that the economy is likely to strengthen in the second half of the year. Rate hikes are expected to hurt bond prices.