U.S. 2-yr Treasury auction attracts decent demand

NEW YORK Nov 23 (Reuters) - The U.S. government sold $44 billion worth of two-year debt on Monday in a decently bid auction, given the expensive levels prevailing in the Treasury market recently.

Overall demand was reasonable, based on the bid-to-cover ratio of 3.16, above the average of 2.78 over the last 12 months but below the two most recent auctions.

The high-yield at the auction was close to rates prevailing in the when-issued market at the auction deadline, indicating dealers were not overly aggressive in trying to bid down prices and drive up yields.

However, at 0.802 percent, it was the lowest high-yield ever, according to the U.S. Treasury Bureau of the Public Debt, reflecting the near-zero-rate policy of the Federal Reserve and expectations that that this would not change soon.

Year-end bookkeeping demands have also led many financial firms to stock up on government debt recently, which has also pushed down yields in the two-year sector.

"A very clean auction, close to recent averages for all categories," said William O'Donnell, head of U.S. Treasury Strategy at RBS Securities in Stamford, Connecticut.

"Indeed, the very light flows in two-years seen today only brought the auction stats back to normal from stellar. Two-year notes are little changed after the results."

Appetite among foreign and institutional investors was reasonable based on the indirect bidding category, which accounted for 44 percent of the sale.

That was above the average of 42.08 percent over the last 12 months but below the 48 percent in the auctions since June, when changes in how calculations are made boosted these figures. (Reporting by Burton Frierson; Editing by Padraic Cassidy) ((burton.frierson@thomsonreuters.com;+1 646-223-6292; Reuters Messaging: burton.frierson.reuters.com@reuters.net))