Econoday Report: 2-Year Note Auction 28, 2005

2005 U.S. Economic Events & Analysis

Resource Center » U.S. & International Recaps | Release Dates | Why Investors Care | Today's Calendar

2-Year Note Auction

Definition
Treasury notes are sold at regularly scheduled public auctions. 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 usually announces the size, date and time of the monthly two-year note auction on the third or fourth Monday of each month, with the auction taking place two days later. The 2-year note is issued (settled) on the last day of the month. In the event of the last day falling on a weekend or holiday, the security is settled on the first business day of the subsequent month. Why Investors Care

Yield Awarded

4.095 %

Highlights
The U.S. Treasury auctioned $20 billion of 2-year notes today with a coupon rate of 4 percent and a high yield of 4.095 percent. The coupon rate is identical to last month's auction rate, but the high yield is up about 8 basis points from last month's auction of the 2-year note. The bid-to-cover ration stood at 2.58, the highest level in 10 months, suggesting relatively strong demand for this issue. The high yield on the issue is slightly higher than anticipated by bond investors -- who were looking for a yield in the range of 4.08 to 4.089 percent. The auction yield is at its highest level since May 2001.

Trends

When the 2-year note is higher than the federal funds rate, it usually suggests that bond investors are expecting the federal funds rate to rise. Conversely, when the 2-year note is lower than the fed funds rate, it suggests that investors are anticipating a rate cut.

Data Source: Haver Analytics