The U.S. Treasury's $42 billion auction of two-year notes had a high yield of 0.769% and a bid-to-cover ratio of 2.93. Indirect bidders took 36%.

The benchmark 10-year Treasury rose 8/32, lowering the yield to 3.171%.

The two-year note weakened 2/32, lifting the yield to 0.759%. The 30-year bond gained 10/32, diluting the yield to 4.074%.

--Written by Melinda Peer and Sung Moss in New York.

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