Bonds waver after solid auction of 5-year notes

NEW YORK — A strong government auction of five-year notes is helping bonds pare steeper losses.

Treasurys traded modestly lower Wednesday after the Treasury Department sold $37 billion in five-year notes. The auction got well over twice as many bids as notes sold. Indirect bidding, which includes foreign buying, was high at 63 percent.

The sale followed a similarly well-received auction on Tuesday. Both helped calm investors’ fears about potential inflation driving foreign buyers away from U.S. government debt. If demand sinks, yields soar, and yields affect rates on mortgages and other consumer loans.

The market’s moves were cautious, however, ahead of the Federal Reserve’s Wednesday afternoon decision on interest rates and economic assessment.

The central bank’s statements this year have brought big moves in the stock and bond markets. The Fed is widely expected to leave its key rate unchanged at a range of zero to 0.25 percent, but investors are less sure about the policy makers’ outlook for the economy.

By early afternoon, the 10-year Treasury note’s yield was flat at 3.63 percent. The 30-year bond’s yield was up at 4.37 percent from 4.36 percent. The 2-year yield rose to 1.18 percent from 1.10 percent.