That category includes dealers' customers but also foreign central banks, and has therefore become the center of attention for investors wary of a possible waning of foreign demand for Treasuries.
As the US Treasury borrowed $20 billion to be repaid over two years, investors settled for a high yield of 4.404 percent.
Overall, the sale garnered 2.42 times the number of bids per dollar of debt on offer, well above an average 2.18 for the previous 11 auctions of 2005.
But the indirect category bought only 29.2 percent of the securities, short of a year-to-date average around 35 percent.
With many traders off for the holidays, the market barely flinched.
Benchmark 10-year notes were off 4/32 and yielding 4.40 percent compared with 4.38 percent Wednesday, while existing two-year notes were also yielding 4.40 compared with 4.37 percent.
This meant the yield curve was once again flat, with spreads between the two maturities hovering near zero.
Five-year notes were now the lowest yielding security in the spectrum, down 4/32 for a yield of 4.35 percent. The 30-year bond lost 8/32 to yield 4.55 percent.
Data published on Thursday was a wash for bonds, with an index of Midwest business activity for December coming in slightly above forecasts and sales of existing homes in November showing a 1.7 percent decline.
The Chicago PMI index inched down to 61.5 from 61.7, beating estimates for a drop to 60.1.
Treasury yields reached two-month lows this week after soft housing data reinforced hopes for a near-term end to the Federal Reserve's 18-month-long campaign of tightening interest rates.
But some investors fear the market may have come too far too fast and foresee a correction early next year, particularly if economic growth data continue to point to strength.
Positive news on the economy tends to hurt bond prices since it gives investors the confidence to venture out into riskier, higher-yielding securities like stocks.
So given a strong growth picture, it is somewhat surprising that bond yields look to be closing out 2005 less than 0.20 percentage point above where they started the year.
US gross domestic product posted an impressive 4.1 percent annualised increase in the third quarter.
These economic skeptics point to the shape of the yield curve, which currently looks more like a flat line than its usual upward sloping contour, as a sign that the economy is headed for trouble. In any case, the near-term fate of bonds would hinge not only on the incoming data but on whatever hints about future policy might emerge from Fed officials.