Definition Treasury notes are sold at regularly scheduled public auctions. 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 usually announces the size, date and time of the monthly two-year note auction on the third or fourth Monday of each month, with the auction taking place two days later. The 2-year note is issued (settled) on the last day of the month. In the event of the last day falling on a weekend or holiday, the security is settled on the first business day of the subsequent month. Released on 04/26/2006 Yield Awarded 4.975 % Highlights The U.S. Treasury auctioned $22 billion of 2 year notes today with a coupon rate of 4.875 and a high yield of 4.975 percent. Both the coupon rate and the high yield are up 25 basis points from a month ago. The bid-to-cover ratio dipped to 2.05, and is slightly less than its long term average. Fed chairman Ben Bernanke is scheduled to speak before the Joint Economic Committee tomorrow and that is causing bond investors to remain cautious in their trading today. Consequently, bond investors did not expect that this issue would go as well as it might have without Bernanke on the docket. Incidentally, this is the highest yield we've seen on the 2-year in more than 5 years. Trends When the 2-year note is higher than the federal funds rate, it usually suggests that bond investors are expecting the federal funds rate to rise. Conversely, when the 2-year note is lower than the fed funds rate, it suggests that investors are anticipating a rate cut. Data Source: Haver Analytics Consensus Data Source: Market News International Legal Notices | © 1998-2006 Econoday, Inc. All Rights Reserved.