uploads/// Week Treasury Bill Issuance versus Bid Cover Ratio

Overall Demand Falls for the 52-Week Treasury Bills


Jul. 27 2015, Updated 11:00 a.m. ET

52-week Treasury bills auction

The U.S. Treasury auctioned $25 billion worth of 52-week Treasury bills, or T-bills, on July 21, 2015. T-bills mature in a year or less. They’re at the very short end of the yield curve. Other Treasury securities like Treasury notes, or T-notes, and Treasury bonds, or T-bonds, are issued for longer maturities.

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Key takeaways

  • The auction was held on July 21.
  • The auction size was set at $25 billion—the same since the March 2014 auction.
  • The issue’s high discount rate was 0.33%—lower than 0.29% in the June 23 auction.

Overall demand

The overall demand for the 52-week T-bills fell in the June auction for the third month. The bid-to-cover ratio fell 2% to 3.4x month-over-month. The ratio was the lowest since 2014 for 52-week T-bills. The ratio had averaged 4.2x in the auctions held in 2014. So far in 2015, the ratio has averaged 3.8x.

The bid-to-cover ratio measures the overall demand for the auction. The lower the ratio, the lower the overall demand for the auction and vice versa.

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Market demand

Like the overall demand, the market demand for the 52-week T-bills also fell from a month ago. The auction saw market demand fall to 28.60% of the competitive accepted bids in July—from 35.10% in the previous auction. The fall was due to both lower indirect and direct bids. The indirect bidders’ category includes bids from overseas governments. The allotment to this category fell to 24.10% in July from 29.30% in June. Direct bids include bids from domestic money managers like Invesco (IVZ) and Wells Fargo (WFC). The percentage of direct bidder allotments fell to 4.50% in July from 5.90% in the June auction.

Due to the lower market demand, primary dealer bids were higher at 71.40% in June—from 64.90% in the previous auction. Primary dealers include companies like Credit Suisse (CS) and Goldman Sachs (GS).

Investment Impact

Mutual funds, like the John Hancock Government Income A (JHGIX) and the Putnam U.S. Government Income TR-A (PGSIX), have exposure to T-bills.

  • The John Hancock Government Income A fund provided a weekly return of 0.25%.
  • The Putnam US Government Income TR-A fund’s weekly return was negative. It came in at -0.07%.

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