Investors Dismiss Fed With Bids for U.S. Notes at Six-Year High

Any trepidation about the Federal Reserve's plan to raise interest rates this year was not enough to damp demand at the Treasury's $26 billion auction of two-year notes.
Foreign central banks and mutual funds came away with 54.4 percent of the debt, the biggest share since 2009. The U.S. central bank will complete a two-day meeting Wednesday and issue a statement about its rate plans.

``This is the part of the curve that would get hurt very hard if the Fed comes in hawkish,'' said David Keeble, the New York-based head of fixed-income strategy at Credit Agricole SA. ``A lot of people are not expecting the statement to be revolutionary in what it says. They are expecting very little.''
The probability that the Fed will raise interest rates at this month's meeting is 2 percent, rising to 75 percent by year-end, based on futures data compiled by Bloomberg.
The securities yielded 0.690 percent at the auction, compared with an average forecast of 0.692 percent from six primary dealers. Two-year note yields touched 0.54 percent earlier this month.
``The back-up in the two-year yield helped,'' Keeble said.
The Treasury will sell $35 billion of five-year securities Wednesday, as well as $29 billion in seven-year securities the following day.