Econoday Report: 5-Year Note Auction 11, 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

3.890 %

Highlights
The second-leg of the Treasury's three-part quarterly refunding, a $15 billion auction of 5-year notes, proved a moderate success, not as strong as yesterday's 3-year auction but good enough especially given confusion following a brief security scare in Washington at midday.

The high yield for the auction was a bit disappointing, at 3.890% and slightly above the when-issued note going into the 1:00 p.m. ET bidding deadline. But coverage was strong, with the bid-to-cover ratio at 2.47 vs. 1.86 in the prior auction (a separate monthly offering in April).

Demand from non-dealers was moderate as indirect bidders accounted for 34.0% of accepted competitive bids, up from 28.2% in April but below the 12-month average of 38.9%.

Reaction in the bond market was limited though Treasury prices did soften a bit. Next up is tomorrow's $14 billion 10-year auction, one that may find the strongest interest of all given the "conundrum" of long rates which have resisted Federal Reserve rate hikes.

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