2012 Economic Calendar
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2-Yr Note Auction
Released On 7/24/2012 1:00:00 PM For 7/24/2012 1:00:00 PM
Auction Results
Bid/Cover4.00 
Coupon Rate0.125% 
Total Amount$35 N 
Yield Awarded0.220% 

Highlights
Results for the monthly 2-year Treasury auction are solid, led by coverage of 4.00 which is the second strongest on record. The stop-out rate of 0.220 percent hits expectations while the 0.125 percent coupon, in a reflection of the low rate environment, is the lowest on record. One negative is a high 59 percent dealer takedown of the $35 billion offering which points to limited participation from buy-and-hold investors.

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 2-year notes are announced around the third week of the month (usually on Thursday) and then auctioned the following week. In all cases, the 2-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) (Department of the Treasury)  Why Investors Care
 
[Chart]

Data Source: Haver Analytics
 
[Chart]
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 -- or at least some stability in policy. Currently, the 2-year note rate is only moderately above fed funds because of the Fed’s commitment to keeping the policy rate exceptionally low through late 2014. This chart shows the average monthly 2-year note yield, not the latest auction results.
Data Source: Haver Analytics
 
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