By Deborah Levine, MarketWatch NEW YORK (MarketWatch) -- Treasury prices held the previous session's strong gains Wednesday as investors hope that a record government sale of 5-year notes garners the kind of strong demand seen during two previous auctions this week. Two-year notes yields (UST2YR 0.92, -0.10, -9.60%) fell 1 basis point to 0.98%. On Tuesday, the yield fell the most since March. Ten-year note yields (UST10Y 3.44, -0.11, -3.15%) were little changed at 3.45%. Bond prices move inversely to their yields. A basis point is one one-hundredth of a percentage point. Looming large for the bond market, the Treasury Department will sell $41 billion in 5-year notes with bids due at 1 p.m. Eastern time. At Tuesday's sale of a record amount of 2-year notes, about 70% of the amount sold went to indirect and direct bidders, groups of investors that include foreign central banks and firms buying for their own accounts. The more the auction goes to direct and indirect bidders instead of primary dealers, the better off for the market. That's because dealers often have to turn around and sell the debt, putting pressure on prices. "The fact that dealers were largely left out of the 2-year might give strength to today's auction," said Bill O'Donnell, head of Treasury strategy at RBS Securities. "But we caution that the strength of carryovers between 2- and 5-year auctions hasn't been as strong as one might suspect." The biggest surprise Tuesday was the amount bought by direct bidders: The group took 26% of the auction, compared to less than 5% at most of the auctions in the last two years. The "directs" group has also been taking a more notable proportion of auctions of other maturities in recent months. "Whenever directs show up in size, it usually happens in subsequent auctions too," George Goncalves, chief fixed-income-rates strategist at Cantor Fitzgerald, wrote in emailed comments. "After such a monster direct bid, non-direct folks will probably bid to win to be on the safe side." Both RBS and Cantor are among the 18 primary government-security dealers required to bid at Treasury auctions. Yields on the current 5-year note (UST5YR 2.36, -0.13, -5.14%) rose 1 basis point to 2.38%, largely stabilizing after having fallen by the most this month on Tuesday. Treasurys had found support in European trading hours as equities fell amid more concerns about the stability of European banks as well as reports in the U.S. that GMAC would need more government support. Treasurys had been a little higher in earlier trading after a government report showed that orders for durable goods rose 1% in September, in line with expectations. Excluding transportation goods, orders increased 0.9%. Economists surveyed by MarketWatch had expected orders, excluding transportation, to increase by 1.2%. See more on durable goods. Still to come at 10 a.m. Eastern time, a report on new-home sales is expected to show an improvement to a 438,000 pace in September.

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