The U.S. government's first sale of two-month debt scored solid demand on Tuesday with bond dealers buying much of the $25 billion supply, as it has leaned on short-term debt to finance a growing budget gap.

The inaugural two-month T-bill was sold at an interest rate of 2.170 percent, just 0.015 percentage point higher than $40 billion of one-month bill issue sold at the same time.

"The Treasury found a point on the bill curve that attracted strong demand," said Jon Hill, interest rate strategist at BMO Capital Markets in New York.

The two-month bill rate was also lower than the two-month expected rate on federal funds, which the Federal Reserve controls to conduct monetary policy, Hill said.

This rate, or the two-month overnight indexed swap rate , was 2.18 percent on Tuesday.

Primary dealers, or Wall Street's top 23 firms that do business directly with the U.S. central bank, purchased much of he inaugural two-month U.S. Treasury bill issue offered on Tuesday, Treasury data showed.

The Treasury allotted this group of buyers $15.44 billion or 61.99 percent of the $25 billion in two-month T-bills at an interest rate of 2.170 percent.

Direct bidders, which include small bond dealers, accounted for $3.76 billion or 15.11 percent of the two-month purchase.

Fund managers, foreign central banks and other indirect bidders bought $5.71 billion or 22.90 percent of the two-month T-bill.

Government borrowing will be vital to service its debt obligations and to finance spending. The tax cut enacted last December and the spending deal passed in February are expected to widen the federal budget gap in the coming decade, analysts said.

On Monday, the Treasury said the federal deficit hit $779 billion in 2018 fiscal year, the largest budget gap since 2012.