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 03/28/2007 Yield Awarded 4.514 % Highlights The Treasury's $18 billion monthly 2-year note auction was well received, posting a solid bid-to-cover ratio of 2.81 and a high yield of 4.514 percent that was right in line with expectations. Demand for the notes was solid but not spectacular, reflected in only moderate interest from non-dealers who took 29 percent of the auction. The coupon for the notes is 4.500 percent, a full 25 basis points below last month's auction -- a sharp month-to-month change reflecting a month of soft economic data and of course subprime-related flight-to-safety to short-end Treasuries. There was 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.