Econoday Report: 5-Year Note Auction 9, 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

3.618 %

Highlights
Bidding was strong at today's 5-year note auction, the second of three auctions in this week's quarterly Treasury refunding.

Five-year auctions are monthly and the months wrapped in with the refundings are often the strongest. The 3.618 percent high rate for the auction was 3 big basis points below the rate on the when-issued note at the bidding deadline.

The bid-to-cover was also strong at 2.53 vs. a 12-month average of 2.27. Indirect bidders accounted for 45.4 percent of accepted competitive bids, hinting at strong demand from Asian investors and Asian central banks.

Today's 3.618 percent rate is well below the 3.741 percent rate last month, as is the 3.50 percent coupon which compares with 3.625 in January. In contrast, yields on shorter-term notes and bills, including yesterday's 3-year note, are on the rise.

Short-term interest rates are going up while long-term rates continue to fall, pointing to an inverted yield curve and one of the key trends to watch this year.

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