Detailed Report

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-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 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 05/25/2006

Yield Awarded

4.945 %

Highlights
Demand was moderate for the Treasury's monthly 5-year note auction as coverage for the $14 billion offering was 2.02, up from 1.87 last month but below the long term average of about 2.30. High yield was 4.945 percent, slightly above midday expectations and a bit above the when-issued note at the 1:00 p.m. ET bidding deadline.

Demand for the note from non-dealers was once again soft. The group made up about 22 percent of accepted competitive bids, only a bit up from last month and well below the long term average of 37 percent.

Bonds edged lower in immediate reaction to the results, which however follow yesterday's very successful 2-year note auction which interestingly seemed not to be hurt by prospects of a Federal Reserve rate hike next month.

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