NEW YORK: Short-dated US Treasury yields climbed on Monday to four-week highs following a weak $26 billion two-year note sale, part of $88 billion of coupon-bearing government debt being auctioned this week.

Longer-dated Treasury yields followed Wall Street stocks lower, with traders wary of possible signals from the Federal Reserve about an interest rate increase later this year following its policy meeting on Tuesday and Wednesday.

“We were slightly apprehensive going into the two-year auction. I don’t see them as rich. I don’t see them as cheap,” said Bruno Braizinha, interest rate strategist at Societe Generale in New York.

The latest two-year Treasury auction resulted in the lowest overall bidding since December 2008, with indirect bidders buying the lowest amount in two years.

Despite the poor start to this week’s coupon auctions, analysts expected the five-year and seven-year supply to fare well as the US central bank is widely expected to leave short-term rates unchanged.

While the US economic expansion has persisted in the aftermath of Britain’s stunning vote last month to leave the European Union, known as Brexit, Fed policymakers remain concerned about low inflation and productivity.

The Dallas Fed said on Monday its index on Texas factory activity improved to -1.3 in July from -18.3 in June. The latest figure was the cusp of returning to positive territory, which last occurred in December 2014.

“They would probably kick the can down the road. After Brexit, there are still a lot of risks in the market,” Justin Hoogendoorn, head of fixed income strategy at Piper Jaffray in Chicago, said of the upcoming Fed meeting.

Interest rates futures implied traders see nearly no chance the Fed would raise rates this week. But they have raised expectations of a rate increase by year-end to more than 50 percent.

The yield on the two-year note, which is sensitive to traders’ views on Fed policy, was up over 1 basis point to 0.723 percent after earlier reaching 0.731 percent, matching the near four-week high struck last Thursday.

Benchmark 10-year Treasury notes were last down 2/32 in price for a yield of 1.575 percent, up almost 1 basis point from Friday.

On Wall Street, the S&P 500 index was down 0.5 percent after posting a series of record highs last week on upbeat company earnings.—Reuters