Lack of market participants at the 13-week Treasury bills auction



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.

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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 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.

These dealers include firms such as Goldman Sachs (GS) and Citigroup Global Markets (C).


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