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Treasury auctions signal investor sentiment before the March FOMC

Part 4
Treasury auctions signal investor sentiment before the March FOMC (Part 4 of 7)

Why T-Bill auctions saw strong demand though rates stayed low

T-Bills

This week (March 10 to 14), public auctions for a number of Treasury securities were held. The securities that have already been auctioned this week include four-week, 13-week, and 26-week T-Bills (BIL) and three-year and ten-year T-Notes (IEF). 30-year T-Bonds (TLT) will be auctioned today (Thursday). Plus, the reopening announcement for the 30-year TIPS bond will also be made today (Thursday).

Part 4Enlarge Graph

Auctions for the four-week, 13-week, and 26-week T-Bills were held this week. The initial announcement for the four-week T-bill was made on Monday, March 10. The announcement mentioned the issue size ($35 billion), auction date (March 11), and settlement date (March 13). The issue will mature on April 10, 2014. The Treasury rate for the four-week bill auction held on Tuesday, March 11, came in at 0.055%—higher than last week’s rate of 0.045%, with a high bid-cover ratio (or the total value of bids received divided by the value of securities on offer) of 4.11x, compared to 3.93x recorded for the previous week.

The Treasury’s announcement for the auction of the 13- and 26-week T-Bills was made last Thursday (March 6). Both T-bills were auctioned on Monday, March 10. The T-bill rate for the 13-week maturity came in at 0.05%, the same as last week. The bid-cover ratio for the $25 billion issue was reported at 4.76x, implying that investor demand for the issue was strong, as the auction received bids more than four times the issue size. The bid-cover ratio, though, was lower than the previous two weeks, which had come in at 4.96x and 5.02x.

The 26-week T-bill was also auctioned on Monday, March 10. The T-bill rate for the auction came in at 0.08%, unchanged from last week’s auction. The bid-cover ratio (or the total value of bids received divided by the value of securities on offer) for the $23 billion issue size was reported at 4.97x, implying that investor demand for the issue was even stronger than the 13-week maturity. Besides, the bid-cover ratio had increased from the 4.46x recorded at last week’s auction.

To read about how the T-Notes auction may impact ETFs like BND and AGG, move on to Part 5 of this series.

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