The U.S. Treasury Department auctioned $29 billion in 7-year notes today at a high yield of 1.932%, the highest yield on the 7-year notes since July of 2011. The bid-to-cover ratio was 2.61, within the average for the past year.

Direct bidders took 15.7% of the auction and indirect bidders, a group that includes foreign central banks, took 46.4%. Indirect bidders have taken an average of 37.3% of recent sales, so demand has picked up markedly for U.S. debt.

The yield on 10-year notes fell by 6 basis points after the auction, to 2.475%, a nice drop from the 2.67% yield this past Monday.

The spike in yields was the result of comments from Fed Chairman Ben Bernanke that were interpreted to indicate that the Fed may begin winding down its asset purchases by the end of this year. Fed officials have been walking back Bernanke’s comments again today, with New York Fed President William Dudley saying that rising interest rates are “out of sync” with FOMC statements, while Fed Governor Jerome Powell said that spiking bond yields were not justified by any “reasonable assessment” of Fed policy.

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