(Recasts, adds analyst quotes, updates yields)
By Kate Duguid
NEW YORK, April 23 (Reuters) - The yield curve steepened to just a tenth of a basis point below its 2019 high on Tuesday, indicating investor bullishness as strong U.S. company earnings pushed the S&P 500 index toward record highs.
The spread between the two- and 10-year Treasury note yields , a highly watched measure of the yield curve, rose as high as 20.7 basis points, for the second consecutive day above 20 basis points, a level the spread has struggled to break through this year.
"We're above that 20-level now that we have been below since early December. So it will be interesting to see if there will be more steepening to the curve," said Justin Lederer, Treasury analyst and trader at Cantor Fitzgerald.
The S&P 500 index moved closer to its record high on Tuesday, as a clutch of better-than-expected earnings reports eased concerns about a slowdown, sparking a broad-based rally.
The benchmark breached its record closing high during the session and was just a few index points away from its intra-day record of 2,940.91 hit on Sept. 21. It has risen about 17 percent so far this year, with help from a dovish Federal Reserve and hopes of a U.S.-China trade resolution.
Yields across maturities were lower, with the most significant dips in the two-, five- and seven-year note yields all of which have fresh supply being auctioned off this week.
There was solid demand for the $40 billion of new two-year notes sold on Tuesday, which saw auction statistics close to recent averages: a 2.51 bid-to-cover ratio, 47.7 percent of the offering taken by indirect bidders, 15.8 percent by direct bidders and the remaining 36.5 percent bought by dealers.
Although increased supply would theoretically drive prices lower, the two-year yield was down 2.5 basis points last at 2.364 percent. Investor demand strengthened because the notes are currently priced competitively, analysts said. Yields have risen from late-March lows amid improved earnings and economic data.
"We have seen the market rally into supply this year, so it kind of went with the theme," said Lederer.
There was also a bid in five-year notes, which saw yields fall 2.7 basis points to 2.361 percent, and in seven-year note yields down 2.5 basis points to 2.462 percent. The Treasury Department will auction off $41 billion five-year notes on Wednesday and $32 billion seven-year notes on Thursday.
(Reporting by Kate Duguid; Editing by Andrea Ricci)