Treasury auctions $26B in 2-year notes at a high yield of 0.92%


U.S. sovereign bond prices pared losses slightly Tuesday after the Treasury Department saw strong demand at a two-year note auction.

The yield on the 10-year Treasury note, which moves inversely to its price, rose to 1.854 percent, while the yield on the 30-year Treasury bond also climbed to 2.645 percent. Two-year yields ticked higher to 0.905 percent and hit their highest level since March 16.

Yields traded higher before the auction.

The Treasury Department on Tuesday sold $26 billion in two-year notes at a high yield of 0.92 percent. The bid-to-cover ratio, an indicator of demand, was 3, versus a recent average of 2.98.


Indirect bidders, which include major central banks, were awarded 49.8 percent, above a recent average of 48 percent. Direct bidders, which include domestic money managers, bought 32.5 percent.

"Bottom line, the highest yield in nearly two months brought out the buyers just as the fed funds futures market was pricing up to a 40 percent chance of a June hike and 68 percent by July," said Peter Boockvar, managing director and chief market analyst at The Lindsey Group.

Investors also digested seesawing oil prices and strong new home sales data.

Oil prices traded in a range Tuesday, with WTI settling 54 cents higher at $48.62 a barrel. Brent crude gained 0.7 percent to $48.68 per barrel. Earlier, both benchmarks traded lower.

U.S. stocks surged, with the three major indexes gaining more than 1 percent. Asian stocks extended global stock losses, with Japan's Nikkei 225 finishing down 0.94 percent and China's Shanghai Composite and Shenzhen closing down 0.76 and 0.9 percent, respectively.

New home sales for April shocked investors, rising 16.6 percent, well above the expected 2.5 percent increase.

CNBC's Patti Domm contributed to this report.