13-week Treasury bills auction
The U.S. Department of the Treasury auctioned the weekly 13-week Treasury bills, or T-bills, worth $24 billion on July 20. The amount on offer has been the same since the March 23 auction.
The overall auction demand, as represented by the bid-to-cover ratio, fell by 5.90% compared to a week ago. The bid-to-cover ratio fell from 4.1x a week ago to 3.8x on July 20.
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 July 20 auction came in at 0.03%—double the 0.015% rate a week ago.
Market demand fell
Market demand fell for 13-week T-bills as both indirect bids and direct bids fell. The share of indirect bids fell to 23% of the accepted bids, from 25.30% a week ago. Indirect bids depict the demand from foreign central banks.
Direct bids had formed 12.60% of accepted bids in the previous week. They fell to 7%. Direct bidders include domestic money managers—for example, State Street (STT).
Due to low market demand, the share of primary dealer bids grew to 70% from 62% in the previous week. 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. They include firms like Goldman Sachs (GS) and Citigroup Global Markets (C). A rise in the percentage of primary dealer bids shows sluggish fundamental market demand.