13-week Treasury bills auction
The U.S. Department of the Treasury auctioned 13-week Treasury bills (BIL) (MINT), or T-bills, worth $26 billion on February 23. The amount on offer was the same as in the previous week. Auction demand was higher in the week. The bid-to-cover ratio rose to 4.2x compared to 4.1x a week ago.
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 23 auction came in at 0.020%, slightly higher than 0.015% in the previous week.
Market demand improved
Market demand improved after having slumped during the previous week. The percentage of indirect bids rose from 13.5% to 23.4%. On the other hand, direct bids fell from 8.6% in the previous week to 5.8%. Direct bids include domestic money managers—for example, State Street (STT).
A fall in the percentage of primary dealer bids shows strong fundamental market demand. The share of primary dealer bids fell from ~78.0% to 70.8%. Primary dealers are a group of 22 broker dealers authorized by the Fed. They’re obligated to bid at U.S. Treasury auctions and take up the excess supply.