Econoday Economic Report: 5-Yr Note Auction November 22, 2011

2011 Economic Calendar

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5-Yr Note Auction

Released On 11/22/2011 1:00:00 PM For 11/22/2011 1:00:00 PM

Auction Results
Bid/Cover	3.15
Coupon Rate	0.875%
Total Amount	$35 B
Yield Awarded	0.937%

Highlights
Coverage of 3.15 is the second highest for any 5-year note auction in available data going back to 1998. This follows yesterday's coverage of 4.07 for the 2-year auction which is the highest ever. The 5-year auction's high yield of 0.937 is 1-1/2 basis points below expectations which is another sign of strength. Concern over the European banking system is raising demand for long-term US Treasuries and is pulling down interest rates here. Tomorrow the Treasury auctions $29 billion of 7-year notes.

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. A group of securities dealers, known as primary dealers, are authorized and obligated to submit competitive tenders at Treasury auctions. Dealers can hold the bills, resell the bills to their clients or trade them with other securities firms. Typically, the New York Fed approves about 20 securities firms to be primary dealers but that number dropped sharply during the recent financial crisis as some were merged into other firms or went bankrupt. The Fed has been rebuilding that number regularly and the latest list can be found here: http://www.newyorkfed.org/markets/pridealers_current.html 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. In all cases, 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. (Department of the Treasury) Why Investors Care

Data Source: Haver Analytics

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