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

Direct Bidders Shun the Four-Week Treasury Bills Auction


Aug. 18 2020, Updated 5:26 a.m. ET

Four-week Treasury bills auction

The US Department of the Treasury conducted the weekly auction for four-week Treasury bills (or T-bills) on August 4. The issuance was $40 billion, the same as in the previous three weeks.

The bid-to-cover ratio for these bills, which depicts overall demand, rose 4.3% from the previous week to 3.6x. Coverage at the one-month T-bills 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 August 4 auction came in at 0.05%, the same as in the previous week.

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Market demand nosedives

Market demand for the four-week Treasury bills nosedived from the previous week. The percentage of indirect bids fell marginally from 25.4% to 24.0% week-over-week. Indirect bidders include foreign central banks.

Domestic investors’ interest in the auction was down from the previous week. The percentage of direct bids fell to 2.7% from 7.2% week-over-week. Direct bidders include domestic money managers like BlackRock (BLK) and Wells Fargo (WFC).

The share of primary dealer bids rose to 73.3% from 67.4% 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 like JPMorgan Chase (JPM) and Morgan Stanley (MS). The rise in the share of primary dealers indicates a weak fundamental demand for the auction.

Investment impact

Mutual funds like the Vanguard GNMA Fund Investor Shares (VFIIX) and the American Funds US Government Sec A (AMUSX) invest in T-bills. The VFIIX provided a week-over-week return of 0.04%, while the weekly return of the AMUSX came in negative at -0.28%.

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


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