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

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


Feb. 17 2015, Updated 10:05 a.m. ET

13-week T-bills auction

The US Department of the Treasury auctioned 13-week Treasury bills (BIL) (MINT), or T-bills, worth $26 billion on February 2. After several months, the amount on offer was raised by $2 billion. Auction demand was lower in the week. The bid-to-cover ratio fell. It rose for five successive weeks. It was 4.1x—compared to 4.5x a week ago.

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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 February 2 auction came in at 0.015%—slightly lower than 0.020% in the previous week.

Market demand fell

Market demand fell. It rose in the previous week. The percentage of indirect bids fell from 22.5% to 18.7% week-over-week. Direct bids tanked from 11.6% in the previous week to 6.9%. Direct bids include domestic money managers—for example, State Street Corp. (STT).

The share of primary dealer bids rose from 65.9% to 74.4%. Primary dealers are a group of 22 broker dealers authorized by the Fed. They’re obligated to bid at US Treasury auctions. They clean up the excess supply. They include firms like Goldman, Sachs & Co. (GS) and Citigroup (C). GS and C are part of the SPDR Financial Select Sector Fund (XLF) and the iShares Core S&P 500 ETF (IVV).

A rise in the percentage of primary dealer bids shows weak fundamental market demand.


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