Two-year Treasury notes fell on Tuesday as Abu Dhabi's $7.5 billion investment in Citigroup sent stocks higher, dropping demand for the bond as a hedge against inflation.

The yield of the two-year note rose from its lowest level since 2004 as investors speculated that Abu Dhabi's cash infusion will help Citigroup expand its business and strengthen capital at the bank which has been damaged by write-downs in the subprime mortgage sector.

The yield on the two year note rose 17 basis points to 3.07 percent at 4:37 in New York. The Yield on Monday reached 2.87 percent, its lowest since 2004.

The yield on ten-year notes rose 12 basis points to 3.95, after reaching 3.79 percent yesterday, its lowest yield since March 2004.