The U.S. Treasury on Tuesday auctioned $69 billion in two-year notes paying the highest yield in more than two years.

The notes sold at a yield of 4.787%, the highest since the May 2024 auction, when it was 4.917%.

The auction comes as investors brace for rising interest rates after hawkish communication from Federal Reserve officials followed the central bank's first rate increase since 2023 last week.

Demand indicators in Tuesday's auction were robust. The bid-to-cover ratio was 2.63, higher than the previous six-month average of 2.61, while the share acquired by the indirect-bidders group, which includes foreign investors, was just below the 58% average.

The auction's high yield was slightly above the when-issued yield of 4.785% at the time of auction.

Following the auction results, the two-year yield ticked higher to 4.766% from 4.762%, according to Tradeweb.