Econoday Report: 5-Year Note Auction 13, 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

4.046 %

Highlights
The Treasury's monthly 5-year note auction drew soft demand, producing a high yield of 4.046% that was a disappointing 2 basis points over the when-issued yield at the 1:00 p.m. ET bidding deadline.

The bid-to-cover was also weak, in fact the weakest in nearly three years at 1.86.

Demand from Asian central banks may have been soft as indirect bidders accounted for only 28.2% of accepted competitive bids, the lowest level in two years and well below the long-term average of roughly 40%.

Are Federal Reserve protests over low long rates now biting into demand? Is the soft dollar finally scaring away foreign bidders? The bond market fell back in initial response to the auction, but losses are likely to be limited given the growing spate of soft economic indicators.

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