Earlier today, the Treasury auctioned $21.0 billion of three-year notes. The issue was sold at a market-clearing yield of 4.995% (coupon of 4.875%), and the auction had a bid-to-cover ratio of 2.31. This compares with the $21.0 billion in three-year notes auctioned in the February refunding. They went off at a market-clearing yield of 4.595% (coupon of 4.500%), with a bid-to-cover ratio of 2.03.
This issue was bid somewhat richer in price than I had anticipated, resulting in a 4.875% coupon. This is versus the 5.000% coupon I had expected. In turn, however, assuming the FOMC moves to a 5% rate on federal funds tomorrow, today's note issue carrying a coupon lower than the presumed new funds rate could prove problematic in open-market trading in the not distant future.
In today's auction, total competitive and noncompetitive tenders were $48.494 billion, excluding an allotment of $6.379 billion to the Federal Reserve System. Additional details are contained in the table below.
To conclude its $34.0 billion May refunding operation, the Treasury will auction $13.0 billion of 10-year notes on Thursday (5/11).
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RESULTS OF THE MAY 2006
TREASURY REFUNDING OPERATION*
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Bid/
Auct. Amt. Cover Non-
Date (Bils) Maturity Coupon Yield Price Ratio Comp.#
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05/09 $21.0 05/15/09 4.875% 4.995% 99.669+ 2.31 $0.395
05/11 $13.0 05/15/16 <------ Not Yet Auctioned ------>
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*Both issues are dated 5/15/06 and settle on
5/15/06. #Amount of issue (in billions) awarded
based on non-competitive tenders submitted.
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