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Bid-to-Cover Ratio Rose for the 4-Week Treasury Bills Auction

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Four-week Treasury bills auction

The U.S. Department of the Treasury conducted the weekly auction for four-week Treasury bills, or T-bills, on September 15. The issuance was $20 billion. This was $10 billion lower than in the previous week. It was the third consecutive reduction in the auction amount.

The bid-to-cover ratio depicts the overall demand. It rose 14.60% from the previous week to 4.1x. The coverage at the one-month T-bills auction has averaged 3.7x so far in 2015. It fell from 4.4x for all of the auctions held in 2014.

The high discount rate for the September 14 auction came in at 0%. In the previous week, the high discount rate was 0.005%.

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Market demand rises

Market demand for the four-week T-bills rose from the previous week. The percentage of indirect bids rose to 24.20% from 14.70% week-over-week. Indirect bidders include foreign central banks.

Domestic investors’ share fell marginally for the auction held last week. The percentage of direct bids fell marginally to 2.60% from 2.80% week-over-week. Direct bidders include domestic money managers—for example, BlackRock (BLK) and Wells Fargo (WFC).

The share of primary dealer bids fell to 73.20% from 82.50% 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).

Investment impact

Mutual funds, like the Vanguard Long-Term Treasury Fund Shares (VUSTX) and the American Funds US Government Sec A (AMUSX), invest in Treasury securities.

VUSTX provided a week-over-week return of 0.48%. AMUSX came in at 0.30%.

For more analysis on mutual funds, please visit Market Realist’s Mutual Fund page.

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