The Treasury Department yesterday auctioned $40 billion of two-year notes with a 7/8% coupon at a 0.940% yield, a price of 99.871675.

The bid-to-cover ratio was 2.94. Tenders at the high yield were allotted 42.94%. The median yield was 0.910%. The low yield was 0.770%. Tenders totaled $117,502,583,700 and the Treasury accepted $40,000,111,300, including $523,288,700 non-competitive. The Fed banks also bought $1,378,373,900 for their own account in exchange for maturing securities. The two-year notes are dated May 31 and due May 31, 2011.

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