The Treasury Department yesterday auctioned $40 billion of two-year notes with a 7/8% coupon at a 0.940% yield, a price of 99.871675.

The bid-to-cover ratio was 2.94. Tenders at the high yield were allotted 42.94%. The median yield was 0.910%. The low yield was 0.770%. Tenders totaled $117,502,583,700 and the Treasury accepted $40,000,111,300, including $523,288,700 non-competitive. The Fed banks also bought $1,378,373,900 for their own account in exchange for maturing securities. The two-year notes are dated May 31 and due May 31, 2011.

Meanwhile, tender rates for Treasury’s latest 91-day and 183-day discount bills were mixed, as the three-months incurred a 0.175% high rate, down from 0.185% the prior week, and the six-months incurred a 0.300% high rate, up from 0.295% the week before.

Coupon equivalents were 0.178% and 0.305%, respectively. The price for the 91s was 99.955764 and that for the 183s was 99.847500. The median bid on the 91s was 0.150%. The low bid was 0.050%. Tenders at the high rate were allotted 46.77%. The bid-to-cover ratio was 3.42. Tenders totaled $105,929,412,600 and the Treasury accepted $31,000,304,300 including $1,329,951,600 of non-competitive.

The median bid for the 183s was 0.280%. The low bid was 0.230%. Tenders at the high rate were allotted 69.37%. The bid-to-cover ratio was 3.09. Tenders totaled $92,809,357,500 and the Treasury accepted $30,000,182,700, including $1,010,107,500 of non-competitive.

Treasury also said yesterday it will sell $35 billion of four-week discount bills today.

There are currently $58.004 billion of four-week, or 28-day, bills outstanding.

The bills settle May 28 and are due June 25.

Federal Reserve banks hold $2.418 billion in maturing bills in their own accounts.

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