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-three primary dealers (as of July 2006) 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 03/27/2006 Yield Awarded 4.730 % 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 4.73 percent. The coupon rate was the same as last month's auction, but the yield increased by slightly more than 4 basis points over the previous month. Generally, interest rates have risen as bond investors anticipate that the Fed will continue to raise its federal funds rate target. The FOMC is meeting today and tomorrow and is expected to announce a 25 basis point rate hike. Investors are more interested in the post-meeting statement than the actual rate increase. This is the first meeting that new chairman Ben Bernanke is chairing and market players are interested to see whether he will leave his mark on the post-meeting statements immediately. Will they be disclose more information than Greenspan's statements? Will this statement indicate that the Fed is nearly done with its rate hikes? Investors are anxiously anticipating the answers to these questions. 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.