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 02/22/2006 Yield Awarded 4.689 % Highlights The U.S. Treasury auctioned $22 billion of 2-year notes today with a coupon rate of 4.625 percent and a high yield of 4.689 percent. The coupon rate was 25 basis points higher than for the 2-year note auctioned last month. Similarly, the high yield was 26 basis points higher than at last month's auction. The Fed, of course, raised the fed funds rate target by 25 basis points since last month's auction. However, bond investors tend to be forward-looking and this probably reflects expectations that the Fed will raise its target rate again in March. 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.