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. 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 11/08/2006 Yield Awarded 4.666 % Highlights The Treasury's 3-year note auction was well received, awarded at a high rate of 4.666 percent that was right in line with late expectations. The bid-to-cover ratio, boosted by a slightly smaller $19 billion offering size, was 2.27, up from 2.14 at the prior 3-year auction in August. But on the soft side was interest from non-dealers who took only 22 percent of the offering vs. a long-term average of 34 percent. Bonds eased in reaction to the results, which however were posted as President Bush announced the resignation of Secretary of Defense Rumsfeld. 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.