30-Year Bond Announcement
|
| Released on
1/30/08
For
Dec 2007
|
|
Offering Amount
|
| Actual |
$
9.0
B
|
|
|
|
|
CUSIP Number
|
|
Actual
|
912810 PW 2
|
|
|
|
|
Definition
Treasury bonds are sold at regularly scheduled public auctions. The competitive bids at these auctions determine the interest rate paid on each Treasury note issue. Twenty primary dealers (as of November 30, 2007) 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 30-year bond auction twice a year - on the first Wednesday of February and August. The bond is auctioned the following week, usually on Thursday and it is issued (settled) on the 15th of the month. If the 15th falls on a weekend or a holiday, it is issued on the next business day. After calling a hiatus in the issuance of 30 Year bonds in 2001, Treasury reinstituted them in February 2006 and followed with another auction in August. Plans are for four auctions in 2007.
|
Why Do Investors Care?
Individual investors can participate in Treasury auctions through a securities dealer or via the Treasury Direct program. The Treasury Direct program saves on brokerage commissions, but the commission is nominal and eliminates a lot of paper work and administrative hassle. Brokers facilitate the purchases and sales of Treasuries in the secondary market, which is handy for buying Treasuries at times other than scheduled auctions or with maturities other than those offered by standard new issues.
Interest rates on Treasury securities are determined in the market; the Federal Reserve does not set them. However, bond investors are sensitive to Federal Reserve policy and thus market rates will mirror policy expectations. Usually, bond market players are forward-looking and this means that interest rates on Treasury securities will move in the direction of Fed policy with a lead. As a result, one is more likely to see rising interest rates on Treasury yields during an expansion (and falling yields during economic slowdowns) in advance of policy changes by the Federal Reserve.
|
|
|