2018 Economic Calendar
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5-Yr Note Auction  
Released On 5/23/2018 1:00:00 PM For 5/23/2018 1:00:00 PM
Auction Results
Total Amount$36 B 
Coupon Rate2.750% 
Bid/Cover2.52 
Yield Awarded2.864% 
CUSIP Number9128284S6 
Originally Announced CUSIP9128284S6 

Highlights
Results are on the soft side for the monthly 5-year note auction, where coverage, at 2.52, was slightly above average but end investor demand was relatively weak, with non-dealers taking down 67 percent of the $36 billion offering, their smallest share since December. The 2.864 percent high yield was 2.7 basis points above last month's auction rate and the highest awarded for the 5-year note since 2008.

Definition
Treasury notes are sold at regularly scheduled public auctions. The competitive bids at these auctions determine the interest rate paid on each Treasury note issue. A group of securities dealers, known as primary dealers, are authorized and obligated to submit competitive tenders at Treasury auctions. Dealers can hold the notes, resell the notes to their clients or trade them with other securities firms. Typically, the New York Fed approves about 20 securities firms to be primary dealers but that number dropped sharply during the 2008 financial crisis as some were merged into other firms or went bankrupt. The Fed has been rebuilding that number regularly and the latest list can be found here. The Treasury announces the amount, date and time of the 5-year note auction monthly. The 5-year notes are announced around the third week of the month (usually on Thursday) and then auctioned the following week. In all cases, the 5-year notes are issued (settled) on the last day of the month, unless it falls on a weekend or holiday, and then they are issued on the next business day. (Department of the Treasury)  Why Investors Care
 
[Chart]

Data Source: Haver Analytics
 
[Chart]
It is not unusual to see average yields on 5-year notes to run at least 100 basis points over the fed funds rate target - at least during periods of stability in monetary policy stance. But the differential has swung in some years. In 2007 and early 2008, the 5-year note rate was below the fed funds target on tight monetary policy. In latter 2008 and through 2011, extremely loose monetary policy pushed the differential back up. This chart shows the high yield awarded at monthly 5-year note auctions since January 2012 up to and including the latest auction results.
Data Source: Haver Analytics
 

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