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Indirect Bidders Shun the 4-Week Treasury Bills Auction

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Four-week Treasury bills auction

The US Department of the Treasury conducted the weekly auction of four-week Treasury bills, or T-bills, on June 16. The issuance was $25 billion, which was $10 billion less than in the previous week.

Depicting overall demand, the bid-to-cover ratio for these bills surged by 22.4% over the previous week to 4.6x. Coverage at the one-month T-bills (BIL) (MINT) auction has averaged 3.8x so far in 2015, down from 4.4x for all the auctions held in 2014. The high discount rate for the June 16 auction came in at 0%, lower than the 0.005% rate in the previous week.

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Market demand tanks

Market demand for the four-week Treasury bills tanked compared with demand in the previous week. The percentage of indirect bids fell to 13.7% of the total auction quantum, down from 34.5% a week ago. Indirect bidders include foreign central banks.

Domestic investor interest in the auction picked up for the second week in a row. The percentage of direct bids rose to 6.2% from 5% week-over-week. Direct bidders include domestic money managers—for example, BlackRock (BLK) and Wells Fargo (WFC).

The share of primary dealer bids jumped to 80.1%, up from 60.5% in the previous week. 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 such as JPMorgan Chase (JPM).

For more bond market trends and analysis, please visit Market Realist’s Fixed Income ETFs page.

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