2012 Economic Calendar
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3-Yr Note Auction
Released On 4/10/2012 1:00:00 PM For 4/10/2012 1:00:00 PM
Auction Results
Total Amount$32 B 
Coupon Rate0.375% 
Bid/Cover3.36 
Yield Awarded0.427% 

Highlights
Results are favorable for the monthly 3-year note auction where coverage of 3.36 is solid and in line with recent trend and where the stop-out rate of 0.427 percent is, in a sign of tight bidding, one full basis point below the one o'clock bid. A weak sign is an elevated share for dealers who were awarded 52 percent of the $32 billion offering. A high share for dealers indicates low participation from long-term investors. Still, the dealer share for this issue is trending lower with the 52 percent the lowest rate of the past five auctions. Tomorrow, the Treasury auctions $21 billion of 10-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. The 3-year notes are announced around the first week of the month (usually on Thursday) and then auctioned the following week. In all cases, the 3-year notes are issued (settled) on the 15th 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
 
[Chart]

Data Source: Haver Analytics
 
[Chart]
When the 3-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 3-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. This chart shows the average monthly 3-year note yield, not the latest auction results.
Data Source: Haver Analytics
 

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