(Recasts with auction results, adds quotes, Fed speakers, updates prices) By Karen Brettell NEW YORK, March 24 (Reuters) - U.S. Treasury yields dipped on Wednesday after the Treasury saw average demand for an auction of five-year notes, with the market appearing to stabilize after benchmark yields reached one-year highs last week. The Treasury sold $61 billion in five-year notes at a high yield of 0.85%, only slightly above where the debt had traded before the auction. The bid-to-cover ratio was close to average at 2.36 times. Market participants are focused on demand for the auctions after very weak interest for a seven-year auction last month sparked a sell-off across the Treasury curve. “It seemed like it had decent stats, the bid-to-cover was better than the previous auction,” said Eric Souza, senior portfolio manager at SVB Asset Management. Recent auctions have shown that “there is some interest at some of these levels.” A $60 billion sale of two-year notes on Tuesday saw solid demand. The Treasury will sell $62 billion in seven-year notes on Thursday. Five-year note yields were last at 0.814%, down from 0.827% before the auction. Benchmark 10-year note yields fell to 1.614% , but held above one-week lows of 1.589% reached overnight. The yields are down from a one-year high of 1.754% reached last Thursday, a day after the Federal Reserve pledged to keep rates near zero for years to come, boosting bets on faster U.S. economic recovery and higher inflation pressures. Investors are debating whether 10-year rates are likely to hold in the 1.60% to 1.75% area, or continue to march higher to the 2% region. “That’s been the big discussion in the markets,” said Souza. For now, the 1.75% region has been seen buying interest. “At least short-term we’ve found attractive levels,” said Justin Lederer, an interest rate strategist at Cantor Fitzgerald in New York. Fed officials have said they are comfortable with the increase in yields, arguing that they reflect a better economic outlook, which Fed Chairman Jerome Powell repeated on Wednesday. The timeline for when the Fed will start to raise rates will depend on what is happening with the economy, which may not return to full strength for some time, New York Fed President John Williams said on Wednesday. Atlanta Fed president Raphael Bostic expects the U.S. central bank will be able to start lifting its interest rates in 2023, the Wall Street Journal reported on Wednesday. Treasury bill yields remained at depressed levels as money market investors struggle with a surge of cash and a drop in supply. One-month yields were last at 0.013%, after going as low as 0.005% last Thursday. The cost of borrowing in the overnight repo market was at 0.03% after trading in negative territory last week. March 24 Wednesday 3:00PM New York / 1900 GMT Price Current Net Yield % Change (bps) Three-month bills 0.02 0.0203 0.005 Six-month bills 0.04 0.0406 0.000 Two-year note 99-246/256 0.1446 -0.009 Three-year note 99-218/256 0.3002 -0.011 Five-year note 98-124/256 0.8141 -0.015 Seven-year note 99-14/256 1.2678 -0.020 10-year note 95-140/256 1.6137 -0.024 20-year bond 94-168/256 2.2083 -0.038 30-year bond 90-140/256 2.3149 -0.033 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 11.25 0.25 spread U.S. 3-year dollar swap 13.25 0.50 spread U.S. 5-year dollar swap 10.75 1.00 spread U.S. 10-year dollar swap 1.75 0.50 spread U.S. 30-year dollar swap -25.25 1.00 spread (Reporting by Karen Brettell; editing by Nick Zieminski and Jonathan Oatis)