2017 Economic Calendar
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5-Yr Note Auction  
Released On 5/24/2017 1:00:00 PM For 5/24/2017 1:00:00 PM
Auction Results
Total Amount$34 B 
Coupon Rate1.750% 
Bid/Cover2.67 
Yield Awarded1.831% 

Highlights
Results are solid for the monthly 5-year note auction, where coverage, at 2.67, was the highest since December, and the bidding tight, pulling down the high yield to the awarded 1.831 percent, about a half of a basis point below the 1:00 bid. Participation by end investors was particularly strong, with non-dealers taking down 78 percent of the $34 billion offering, their largest share in a year. The awarded high yield was 4.4 basis point below last month's rate and 22.6 basis points below the December peak at 2.057 percent, which was the richest high yield since April 2011. Prices of treasuries firmed immediately following the release of the solid auction results.

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 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 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
 
[Chart]

Data Source: Haver Analytics
 
[Chart]
It is not unusual to see average yields on 5-year notes to run at least 100 basis points over the fed funds rate target - at least during periods of stability in monetary policy stance. But the differential has swung in some years. In 2007 and early 2008, the 5-year note rate was below the fed funds target on tight monetary policy. In latter 2008 and through 2011, extremely loose monetary policy pushed the differential back up. This chart shows the average monthly 5-year note yield, not the latest auction results.
Data Source: Haver Analytics
 

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