The U.S. government's auction of benchmark 10-year notes Tuesday was met with outsized demand from investors. That sent Treasury prices sharply higher.
The Treasury Department sold $21.7 billion of benchmark 10-year notes. Demand outstripped supply by 3.53 times, far outpacing the average of 3.04 over the last eight auctions.
Traders said the market was taken by surprise by a large "indirect order," which is usually a proxy for a foreign buyer. Foreign buyers picked up 61 percent of the offering, compared with 42.8 percent in recent auctions.
"It shows that the Treasury is the only game in town," said John Briggs, Treasury strategist at RBS Global Banking & Markets.
In recent months, global investors have been spooked by the waning value of debt issued by European countries. Italy and Spain had to recently pay high interest rates in bond auctions and a German auction of its benchmark bonds had tepid demand.
The European debt crisis continues to linger. Despite several meetings among leaders, there is no sign that it is close to being resolved.
The price of the 10-year note rose 46.8 cents for every $100 invested. The yield dropped to 1.96 percent from 2.02 percent from late Monday.
The 30-year Treasury bond rose $1.12, and its yield dropped to 2.99 percent from 3.06 percent Wednesday. The yield on the two-year note inched up to 0.25 percent, up from 0.23 percent.
In the market for T-bills, the three-month bill paid a yield of 0.01 percent. Its discount was unavailable.