Econoday Report: 5-Year Note Auction 28, 2008

2008 U.S. Economic Events & Analysis

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5-Year Note Auction

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 primary dealers (as of November 30, 2007) 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. The 5-year notes are announced around the third week of the month (usually on Thursday) and then auctioned the following week (usually Thursday). The 5-year notes are issued (settled) on the last day of the month, unless it falls on a weekend or holiday, and then they are issued on the next business day. Why Investors Care

Yield Awarded

3.129 %

Highlights
Large auction sizes made for a run of sloppy auctions this week, beginning with the 3- and 6-month bills and ending with today's 5-year note auction. The bid-to-cover ratio for today's large $22 billion auction was soft, at 2.14 vs. 2.46 in the prior 5-year auction and a long term average of 2.32. The stop-out rate of 3.129 percent was more than a full basis point over the 1:00 p.m. bid. Interest from indirect bidders was on the light side with the group taking 29 percent of the auction vs. a 32 percent average. Auctions prior to this week have been strong, but this week's results do suggest that large auction sizes, reflecting rising borrowing needs by the Treasury, are making for weak demand and sloppy results.

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 and Thomson Financial

2008 Release Schedule

Released On: 1/26 1/29 2/28 3/27 4/24 5/29 6/26 7/24 8/28 9/25 10/30 11/26 12/24

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