2016 Economic Calendar
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10-Yr Note Auction  
Released On 2/10/2016 1:00:00 PM For 2/10/2016 1:00:00 PM
Auction Results
Total Amount$23 B 
Coupon Rate1.625% 
Yield Awarded1.730% 

Bidding was tight for the monthly 10-year auction where the stop-out rate, at 1.730 percent, was more than 1 basis point below the 1:00 bid. Non-dealers, unlike for yesterday's 3-year auction, were active bidders, taking down an outsized 78 percent of the downsized $23 billion offering. Despite the low offering size, coverage was slightly below average at 2.56. The coupon for this issue, coming in at 1.625 percent, is down sharply from 2.250 percent for the January auction for the lowest since 2012. Demand for Treasuries is rising following the results. Tomorrow the Treasury auctions $15 billion of 30-year bonds.

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. The level of demand for an auction is measured by coverage which is the ratio of bids tendered to bids accepted. The higher this number, the stronger the demand. 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 2008 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 Treasury announces the amount, date and time of the 10-year note auction monthly. The 10-year notes are announced around the first week of the month and then auctioned the following week. Generally, the 10-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

Data Source: Haver Analytics
Between 2000 and 2011, the spread between the 10-year note and the federal funds rate averaged 173 basis points. More recently, in 2009 this spread grew to 310 basis points on fears of excess supply from financing the jump in the federal deficit but slipped to 304 basis points in 2010 and to 268 basis points in 2011. Essentially, a stronger economy and some reversal of flight to safety pushed rates back up in early 2011. However, in mid- 2011, the economy slowed and sovereign debt worries returned. A hefty decline in equities also added to flight to safety at mid-year though stocks bounced back later in the year, reflecting partial reversal of flight to safety. This chart shows the average monthly 10-year note yield, not the latest auction results.
Data Source: Haver Analytics

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