3 Month, 6 Month and 2 Year Note Auction, Treasuries or CDs Continued

The Treasury Department auctioned off $38 billion in two year notes yesterday, December 22, 2008.  The yield on these notes reached an all time low with a yield 0.92%.  The apparent flight to quality has reached the level of insanity.  If rates rise, selling these notes after the auction will lead to a loss.  If inflation rises, the interest paid on these notes will have almost no room to keep pace with even the most minimal inflation rate.  And for individual investors there are alternatives to these historically low yields.  Bank CD rates have steadily dropped since the last fed funds cut, however due to the healthy competition among banks for consumer deposits, interest rates on CDs remain high relative to comparable investments.

Auction results indicated that $80,924,970,600.00 in total bids for the two year notes were tendered while $38,000,020,600.00 were accepted.  The issue date is December 31, 2008 and the maturity date is December 31, 2010. The bid-to-cover ratio was 2.13.

The weekly auction of 3 month Treasury bills and 6 month Treasury bills were slightly mixed.  The 3 month or 13 week bills were auction at a rate of 0.04% down from the previous week and the 6 month or 26 week bills were auctioned with a rate of 0.285%, up slightly from the previous week’s level of 0.27%.

The 6 month auction had total bids of $72,222,972,500.00 and accepted bids of $27,000,072,500.00.  This resulted in a bid-to-cover ratio was 2.67.  The 3 month bills had total bids of $78,245,199,500.00 and accepted bids of $27,000,111,500.00.  The bid-to-cover ratio was 2.90.

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