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. Four times a year, the Treasury announces the amount, date and time of the 3-year note auction (usually the first Wednesday of February, May, August and November). These notes are usually auctioned during the second week of these months (often on Tuesday) and are issued (settled) on the 15th of the month. If the 15th falls on a weekend or a holiday, they are issued on the next business day. Released on 02/07/2006 Yield Awarded 4.595 % Highlights The U.S. Treasury auctioned $21 billion of 3-year notes with a coupon rate of 4.50 percent and an awarded yield of 4.595 percent. The November auction had a 4.375 percent coupon and an awarded yield of 4.458 percent, but rates have been on the rise over the past few months -- particularly at the short end of the curve. Demand for this issue was not as strong as in the previous three auctions as the bid-to-cover ratio fell back to 2.03. However, the auction was generally in line with expectations since market players were looking for an awarded yield between 4.59 and 4.60 percent. While the 3-year may be showing some value for investors, it doesn't have the natural demand of 10-year and 30-year securities, which are used for pension funds. Trends When the 3-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 3-year note is lower than the fed funds rate, it suggests that investors are anticipating a rate cut -- or at least some stability in policy. This chart shows the average monthly 3-year note yield, not the latest auction results. Data Source: Haver Analytics Consensus Data Source: Market News International Legal Notices | © 1998-2006 Econoday, Inc. All Rights Reserved.