26-week Treasury bills auction
The U.S. Department of the Treasury held the weekly 26-week Treasury bills, or T-bills, auction on July 20. T-bills worth $24 billion were on offer—unchanged since the March 23 auction.
The bid-to-cover ratio fell 5.70% from the previous week to 3.7x. In 2015, the bid-to-cover ratio has averaged 4.2x. The ratio depicts the overall demand for the auction.
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 0.135%—up from 0.10% in the previous week.
Market demand falls
Fundamental market demand fell last week. Accepted indirect bids rose marginally to 34.80% week-over-week from 33.50% in the previous week. Indirect bids are from the foreign central bank. They depict the international demand for the auction.
Meanwhile, the percentage of direct bids fell to 2.70% week-over-week from 4.90% a week ago. Direct bids include bids from domestic money managers—for example, Wells Fargo (WFC).
Due to lower market demand, the share of primary dealer bids rose to 62.50% of the auction from 61.70% in the previous week. Primary dealers are a group of 22 authorized broker-dealers. They’re obligated to bid at U.S. Treasury auctions and take up excess supply. They include firms like Goldman Sachs (GS) and Citigroup Global Markets (C). A rise in the percentage of primary dealer bids indicates weak fundamental market demand.