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 10/24/2006 Yield Awarded 4.894 % Highlights Demand was strong at today's monthly auction of 2-year Treasury notes, which were awarded at 4.894 percent and right in line with expectations. The rate is more than 23 basis points above last month's award rate, a reminder of how far yields on the short-end have backed up. The bid-to-cover ratio was very very strong at 2.91, and non-dealers made up a respectable 31 percent of accepted bids. The bond market, awaiting tomorrow's FOMC, showed no reaction to the results. 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.