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4-Week Treasury Bills Auction: Borrowing Quantum Highest in 2015

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4-week Treasury bills auction

The U.S. Department of the Treasury conducted its weekly auction for four-week Treasury bills (or T-bills) on November 17, 2015. The issuance was $55 billion, which was $3 billion higher than in the previous week. The borrowing quantum the highest recorded so far in 2015 for a four-week Treasury bills auction.

The bid-to-cover ratio, depicting overall demand, rose 2.1% from the previous week to 3.4x. Coverage at the one-month T-bills auction has averaged 4.2x so far in 2015, down from 4.4x for all the auctions held in 2014.

The high discount rate for the November 17 auction came in at 0.08%, the same as in the previous week.

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Market demand fell

Market demand for four-week Treasury bills fell from 38.7% in the previous week to 30.0% in the week ended November 17. The percentage of indirect bids fell to 21.4% from 32.3% week-over-week. Indirect bidders include foreign central banks.

Domestic investors’ share rose for the November 17 auction. The percentage of direct bids rose to 8.3% from 6.4% week-over-week. Direct bidders include domestic money managers such as BlackRock (BLK) and Wells Fargo (WFC).

Primary dealers’ bids rose to 70.3% from 61.3% 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 such as JPMorgan Chase (JPM) and Morgan Stanley (MS).

Investment impact

Mutual funds, such as the PIMCO GNMA Fund – Class A (PAGNX) and the MFS Government Securities Fund – Class A (MFGSX) invest in Treasury securities.

PAGNX provided a week-over-week return of 0.05%. The weekly return of MFGSX came in at 0.14%.

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

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