Treasury prices jumped on Tuesday after a mixed auction of 2-year notes and a round of lackluster data, highlighting the continued boost the market is receiving in the wake of a Federal Reserve decision to postpone the wind-down of its bond-buying program.

The 10-year Treasury note 10_YEAR +0.30%  yield, which moves inversely to price, fell 5 basis points on the day to 2.655%, hitting its lowest level since August 12 during its ninth day of gains in 10 sessions. The 30-year bond 30_YEAR +0.16%  yield fell 6 basis points to 3.670%, and the 5-year note 5_YEAR +0.56%  yield fell 3.5 basis points to 1.421%.

The 2-year note yield 2_YEAR +6.59%   traded on Tuesday at 0.330%, down a basis point on the day, after an auction of $33 billion of the notes. The auction represents a reduction of $1 billion from last month’s sale of 2-year notes, and $2 billion from prior sales as the U.S. government’s reduced deficit decreases the amount of borrowing.
The Treasury Department sold the debt at a yield of 0.348%, slightly below where the broader market was trading at the time. The yield was below the yields offered in August and June sales of 2-year notes.

Demand from direct bidders, which includes domestic money managers, came in strong, with that class of investors taking down 21.8% of the auction, compared with an average of 18.7% in the last six sales. Indirect bidders bought 24% of the sale, compared with an average of 24.8%.

“The 2-year is relatively pegged by Fed policy and not likely to rise in yield any time soon, so short-end investors find the 2-year attractive,” said Michael Pond, head of global inflation-linked research at Barclays.

The ratio of bids to the amount of debt sold was 3.09 times, slightly below the average of 3.21 times. 

The Treasury Department will also sell $35 billion of 5-year notes on Wednesday and $29 billion of 7-year notes on Thursday.

The auctions come as the bond market is once again on alert for information that could shed light on when and how the Fed acts to scale back the pace of its $85 billion in monthly bond buys, which had been used to help stimulate economic growth. The central bank’s decision not to taper at its policy meeting last week surprised many market participants, who saw bonds sell off sharply during the summer in anticipation of Fed action.

“I think the market is still looking for an equilibrium level,” said Bill Hornbarger, chief investment strategist at the Moneta Group. “The market is looking for a level where it can settle in based on expectations of the Fed and fiscal policy.”

New York Fed President William Dudley said on CNBC Tuesday that markets should not have been surprised by the Fed’s decision to hold off on tapering.

Given the Fed’s dovish tone, some are nowprojecting yields to continue their move lower.

“On a risk-adjusted basis, we believe that Treasurys offer good value as yields recede following the recent rise,” said HSBC Global Research strategists, led by Fredrik Nerbrand, global head of asset allocation, in a note. “Our fixed-income strategists expect the 10-year U.S. Treasury yield to fall to 2.1% over the next 12 months. Such a move should have a sizeable impact on the entire financial landscape.”

As talks over a deal to pass a temporary budget and raise the debt ceiling continue, Moody’s Investors Service warned Tuesday that a failure to raise the borrowing limit, thereby putting the U.S. at risk of a default, would have an adverse impact on financial markets. The cost to insure $1 million against default for five years rose to $31,000 annually Tuesday, according to data provider Markit. It had been at $22,000 annually on Friday.

Treasurys rose Tuesday morning after data showed waning confidence about economic growth. The Conference Board’s consumer confidence index fell to 79.7 in Septemberfrom a revised 81.8 in August. That beat economists’ projections of a drop to 79.5, but registered at the lowest in four months on renewed worries about wages and job availability.

Home prices rose by a seasonally adjusted 1% in July, according to Federal Housing Finance Agency data Tuesday, an 8.8% jump from the same period a year ago. The S&P/Case Shiller 20-city composite index showed a 1.8% rise in July, the smallest jump since March.