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. Released on 04/27/2006 Yield Awarded 4.964 % Highlights The U.S. Treasury auctioned $14 billion of 5-year notes today with a coupon rate of 4.875 percent and a high yield of 4.964 percent. The coupon rate is just over 12 basis points higher than last month's auction, while the high yield is nearly 18 basis points higher than at last month's auction. Bond investors expected this issue to go well because it took place after Ben Bernanke's testimony before the Joint Economic Committee and his comments were viewed in a friendly light this morning. However, the bid-to-cover ratio fell back to 1.87, the lowest in 12 months, signaling that perhaps demand was not as good as predicted. Furthermore, the WI trading (trading the note before it was auctioned) showed the yield at 4.949 percent, slightly lower than the high yield awarded. Granted, this auction did better than yesterday's 2-year note auction, which had a high yield of 4.975 percent, just a little higher than today's 5-year note. It is indeed surprising that the note auction didn't perform better in light of Bernanke's comments that the Fed stood ready to pause on rate hikes depending on how the economy was performing. 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 Consensus Data Source: Market News International Legal Notices | © 1998-2006 Econoday, Inc. All Rights Reserved.