2007 U.S. Economic Events & Analysis
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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-three primary dealers (as of July 2006) 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
4.886 %

Highlights
The Treasury's monthly offering of 2-year notes, at $18 billion for the fourth straight month, proved less strong than recent auctions and may reflect expectations that interest rates will continue to rise. The high yield was right at expectations at 4.886 percent but the bid-to-cover was below trend at a still solid 2.53. Especially soft was interest from non-dealers, who took only 23 percent of the offering for the lowest percentage in nearly two years and one of the lowest on the charts. But the results didn't shake the Treasury market which slipped only very slightly in reaction. Tomorrow the Treasury will auction $13 billion of 5-year notes.

Trends
[grid]
[Chart] 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 | Consensus Data Soruce: Market News International and Thomson Financial

 
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