Econoday Report: 5-Year Note Auction 7, 2005

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5-Year Note Auction

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. Twenty-two primary dealers (as of August 2004) are authorized and obligated to submit competitive tenders at Treasury auctions. Dealers can hold, resell, or trade the securities with other firms. The Treasury announces the amount, date and time of the 5-year note auction monthly. Eight times a year, the 5-year notes are announced around the second week of the month (usually on Monday) and then auctioned two days later. In February, May, August and November, they are announced on the first Wednesday of the month and auctioned during the second week of the month (usually on Wednesday). In all cases, the 5-year notes are issued (settled) on the 15th of the month, unless it falls on a weekend or holiday, and then they are issued on the next business day. Why Investors Care

Yield Awarded

4.435 %

Highlights
The U.S. Treasury auctioned $13 billion of 5 year notes today with a coupon rate of 4.375 percent and a high yield of 4.435 percent. Both the coupon rate and the high yield reflect lower yields from the November auction. Market pundits indicated that a good auction would result in a high yield in the range of 4.435 and 4.44 percent; since the high yield indeed came in at the lower end of that range, the auction can be deemed a successful one. However, the bid-to-cover ratio fell back to 2.38, in line with the long term average, but significantly lower than in the four previous auctions (August to November). On the whole, interest rates have been on the rise in the past few months as bond investors worry about upcoming Fed rate hikes. In the past couple of weeks, auction results have been highly dependent on the current day's events. For instance, good economic news means further worries about rate hikes, while soft economic news leads to lower yields because it implies the Fed will soon stop raising rates.

Trends

This chart reflects the monthly average yields for 5-year notes in the secondary market. These could be at slight odds with the auction averages in the primary market.

Data Source: Haver Analytics

2005 Release Schedule

Released On: 1/12 2/9 3/9 4/13 5/11 6/8 7/13 8/10 9/7 10/12 11/9 12/7

Released For: Dec Jan Feb Mar Apr May Jun Jul Aug Oct Oct Nov