(Recasts with auction; adds quotes, Powell and Yellen comments; updates prices) By Karen Brettell NEW YORK, March 23 (Reuters) - The Treasury Department drew solid demand for a $60 billion sale of two-year notes on Tuesday, the first sale of $183 billion in coupon-bearing supply this week, while longer-dated yields held below one-year highs reached last week. The two-year notes sold at a high yield of 0.152%, close to where the debt had traded before the sale. Direct bidders, which includes some foreign governments, took a larger than usual share of the sale at 17.58%. “The auctions are very important, and I think today"s went well,” said Lou Brien, market strategist at DRW Trading in Chicago. Investors are focused on demand at the auctions after a sale of seven-year notes last month drew very weak interest and sparked selling across the Treasury curve. The Treasury will sell $61 billion in five-year notes on Wednesday and $62 billion in seven-year notes on Thursday. Yields rose after the Federal Reserve said last Wednesday that the U.S. economy is heading for its strongest growth in nearly 40 years, with central bank policymakers pledging to keep their foot on the gas despite an expected surge of inflation. Now that the Fed’s message has been absorbed by the market, economic data and demand for Treasury supply will be important in determining market direction, said Brien. “We should just be able to react to the data now, with the auctions being an important part of that because we can use that as a measure of how nervous the Treasury market is,” he said. Fed Chair Jerome Powell told U.S. lawmakers on Tuesday that a coming round of post-pandemic price hikes will not get out of hand and fuel a destructive breakout of persistent inflation. Treasury Secretary Janet Yellen also told a House of Representatives Financial Services Committee on Tuesday that there are no current plans to lengthen the maturity of U.S. Treasuries. The recent climb in yields to key technical levels also appeared to attract buyers on Tuesday, boosting prices. Benchmark 10-year yields reached 1.702% overnight, before dipping to 1.638%. “That must have been a trigger for some buying, or a psychological level,” said Tom Simons, a money market economist at Jefferies in New York. The yield reached a one-year high of 1.754% last Thursday, meeting many analysts" short-term target of 1.75%. Treasury bill yields remained at depressed levels as money market investors struggle with a surge of cash and a drop in supply as the Treasury cuts its issuance of bills to pay down its cash balance. One-month yields were last at 0.015%, after getting as low as 0.005% last Thursday. The cost of borrowing in the overnight repo market was at 0.01% after trading in negative territory last week. March 23 Tuesday 3:01PM New York / 1901 GMT Price Current Net Yield % Change (bps) Three-month bills 0.015 0.0152 0.000 Six-month bills 0.04 0.0406 -0.002 Two-year note 99-244/256 0.1493 0.000 Three-year note 99-210/256 0.3107 -0.010 Five-year note 98-106/256 0.8286 -0.029 Seven-year note 98-236/256 1.288 -0.043 10-year note 95-84/256 1.6382 -0.044 20-year bond 94-16/256 2.2466 -0.042 30-year bond 89-216/256 2.3497 -0.032 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 11.00 -0.25 spread U.S. 3-year dollar swap 12.75 0.25 spread U.S. 5-year dollar swap 9.75 0.00 spread U.S. 10-year dollar swap 1.00 -0.25 spread U.S. 30-year dollar swap -26.25 -0.25 spread (Reporting by Karen Brettell; Editing by Susan Fenton and Dan Grebler)