Econoday Report: 5-Year Note Auction 12, 2005

2005 U.S. Economic Events & Analysis

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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

3.731 %

Highlights
Results for the Treasury's monthly 5-year note auction were moderate with the high yield coming in at 3.731 percent, about the same as the when-issued note at the bidding deadline and up a sizable 14 basis points from last month.

The bid-to-cover was also moderate, at 2.37 vs. 2.60 in December and against the same 2.60 coverage for all of 2004.

Bidding by retail accounts and foreign central banks was firm but down from last month with 39.8 percent of the auction awarded to indirect bidders vs. 44.8 percent in October.

Wednesday's results aren't soft enough to begin asking whether rising interest rates are eating into demand for Treasuries. But reception of next month's quarterly Treasury refunding, which will include another 5-year issue as well as 3- and 10-year issues and which will follow the Federal Reserve's Feb. 1 policy meeting, will be watched carefully for any hint of weakness, especially in demand from foreign buyers.

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