* Fed's Harker says will support March hike
* U.S. two-year note auction shows strong demand
(Adds comment, updates prices)
By Gertrude Chavez-Dreyfuss
NEW YORK, Feb 21 U.S. Treasury debt yields edged
higher in rangebound trading on Tuesday, supported by generally
improved market appetite for risk as stocks and commodities
"I see stocks have bounced very sharply, so this could just
be risk sentiment, said Gennadiy Goldberg, interest rates
strategist at TD Securities in New York. "But the market is
rangebound, so all these moves are happening within a tight
Benchmark U.S. 10-year and two-year Treasury note yields
rose after falling for two straight days.
Investors were also looking ahead to Wednesday's release of
the Federal Reserve's minutes of its latest meeting for clues on
the timing of the next interest rate hike. Fed Chair Janet
Yellen said last week a rate increase would be considered at
every policy meeting, suggesting the U.S. central bank could
move next month.
Philadelphia Fed President Patrick Harker on Tuesday,
echoing Yellen's remarks, said he would support a rate increase
at a mid-March policy meeting as long as inflation, output and
other data continue to show a growing U.S. economy.
"We get the sense that the Fed wishes to provide a much less
ambiguous guidance than it did in its February policy
statement," said Thierry Albert Wizman, global rates and
currencies strategist at Macquarie Group.
"Fed officials clearly don't wish to be accused of taking
the market by surprise if they did move in March or May."
The Fed funds futures market is pricing in a roughly 22
percent chance of a March hike, according to the CME Group's
The U.S. Treasury's $26 billion two-year note sale,
meanwhile, was strong across the board, posting a high yield of
1.230 percent compared with the expected yield of 1.235 percent
at the bid deadline.
There were nearly $73.3 billion in bids for a 2.82 cover,
better than both last month's 2.68 and the 2.69 average.
Indirect bidders accepted 49.8 percent, also a little above the
prior month's 48.8 percent, as well as the 42.0 percent average.
In late trading, U.S. 10-year notes were last
down 1/32 in price to yield 2.427 percent, up from 2.425 percent
U.S. 30-year bond prices were down 4/32,
yielding 3.038 percent, up from Friday's 3.031 percent.
U.S. two-year note prices were flat, yielding
(Reporting by Gertrude Chavez-Dreyfuss; Editing by Meredith
Mazzilli and Dan Grebler)