Two-year Treasury notes auctioned by the Treasury Department on Tuesday received strong demand, largely thanks to a surge in buying from foreign investors. The yield on notes sold at the auction was half a basis point lower than their comparable 1 p.m. level, according to Treasury data, meaning that investors paid a premium for the bonds. Indirect bidders, a group that's seen as a proxy for foreign demand, received 49.8% of the new notes, a much larger allocation than the 38.9% average from the six most recent auctions, traders said. But despite a drop in Treasury yields ahead of the auction, demand remained surprisingly robust, said Aaron Kohli, a fixed-income strategist at BMO Capital Markets. The auction's bid-to-cover ratio, a measure of demand, was 2.82, compared with an average of 2.64 from the six most recent auctions. The yield on the two-year note rose 1.7 basis point to 1.203% in recent trade.
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