Auction to sell record $40 billion in 2-year notes Treasury prices traded little changed Tuesday, erasing earlier gains that followed Federal Reserve chief Ben Bernanke saying the bigger risks to the U.S. economy remain on the downside and that actions taken to fix the nation's banks and financial institutions will take time to work. Yields on 10-year note yields , which move inversely to prices, eased 1 basis point to stand at 2.75%, recovering after having earlier fallen to 2.69%. A basis point is 0.01%. If actions taken by the Obama administration and the Fed are successful in restoring some measure of bank stability, "there is a reasonable prospect that the current recession will end in 2009 and that 2010 will be a year of recovery," Bernanke said in testimony on monetary policy. See story. Many investors have been counting on Bernanke to give a shot of optimism when he delivers his semiannual report on monetary policy and the state of the economy to congressional committees on Tuesday and Wednesday. "People were looking for him to say something positive for the banking system," said Andrew Brenner, co-head of structured products and emerging markets at MF Global. "There is a real lack of confidence in the government, the economy, the world, politicians, Wall Street, everything." Investors are also interested in his views about the Fed's latest efforts to bring stability back to financial markets, including administering "stress tests" to banks before making any further federal funds available. "We assume that Bernanke will describe the stress tests as an effort -- at long last -- to get ahead of the curve on the financial rescue," analysts at Wrightson ICAP, a research firm specializing in government finance, wrote in a note. Separately, a survey by the Conference Board showed consumer confidence plunged in February to a record low as concerns about jobs, incomes and the economy considerably worsened. The index fell to 25 from a downwardly revised 37.4 in January. Economists surveyed by MarketWatch had expected a February reading of 35. See full story. Accommodating growing debt issuance Capping gains in shorter-term government debt, traders got their bids ready for a record $40 billion in 2-year notes to be auctioned, the first of three sales of short-term notes this week. Yields on 2-year notes were little changed at 0.94%. Bids on the new 2-year notes are due at 1 p.m. Eastern time. That will be followed by $32 billion in 5-year notes to be sold on Wednesday and $22 billion in 7-year debt on Thursday, the first sale for this maturity since 1993. The Treasury will also sell 4-week bills on Tuesday. The government has had to quickly and dramatically increase the amount of debt it sells in order to bankroll multiple programs to stabilize financial markets as well as the Obama administration's $787 billion economic-stimulus package. Bond yields tend to rise when supply increases because investors demand a higher return to take on additional debt. "The market is in a range, and the bulk of the range volatility is currently being dictated by supply accommodation," said analyst at RBS Greenwich Capital.

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