uploads///Weekly T Bill Issuance and Bid Cover Ratio

Bid-to-cover ratio rose at the 13-week Treasury bills auction

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13-week T-bills auction

The US Department of the Treasury auctioned 13-week, or three-month, Treasury bills (BIL) (MINT), or T-bills, worth $24 billion on January 20. The auction amount hasn’t changed for several months.

Auction demand was higher in the week. The bid-to-cover ratio rose for the fourth week in a row, as you can see in the above graph. It was 4.3x—compared to 4.2x the previous week.

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Yield analysis

T-bills don’t pay a coupon. They’re offered at a discount to face value. They’re redeemable at par on maturity. The high discount rate for the January 20 auction came in at 0.025%. It was the same as the previous week.

Market demand fell

Market demand fell. It increased last week. The percentage of indirect bids decreased from 22.8% to 13.5% week-over-week. In contrast, direct bids rose from 9.6% in the previous week to 12.4%. Direct bids include domestic money managers—for example, State Street Corp. (STT).

The share of primary dealer bids rose from 67.5% to 74.1%. Primary dealers are a group of 22 broker dealers authorized by the Fed. They’re obligated to bid at US Treasury auctions and take up the excess supply. They include firms like Goldman, Sachs & Co. (GS) and Citigroup (C). GS and C are part of the SPDR MSCI World Quality Mix ETF (QWLD) and the iShares Core S&P 500 ETF (IVV).

An increase in the percentage of primary dealer bids shows weak fundamental market demand.

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