2017 Economic Calendar
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5-Yr Note Auction  
Released On 6/27/2017 1:00:00 PM For 6/27/2017 1:00:00 PM
Auction Results
Total Amount$34 B 
Coupon Rate1.750% 
Bid/Cover2.33 
Yield Awarded1.828% 

Highlights
Results are moderately mixed for the monthly 5-year note auction, where coverage at 2.33 was moderate and the bidding slightly sloppy, pushing up the high yield to the awarded 1.828 percent, about a half of a basis point above the 1:00 bid. But demand from end investors was quite solid, with non-dealers taking down an above average 74 percent of the $34 billion offering. The 1.828 percent high yield was 0.3 basis points below last month's awarded rate and 22.9 basis points below the long term auction yield peak set in the December 2016 auction, when fixed coupon treasury yields rose on yet unfulfilled and since downwardly revised expectations of a pickup in inflation fueled by the anticipated fiscal stimulus of the new administration.

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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