52-week T-bills auction
The US Department of the Treasury auctioned $12 billion worth of 52-week Treasury bills, or T-bills, on November 10, 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
- The auction was on November 10.
- The auction size was $12 billion—$2 billion higher than October’s auction. The borrowing quantum was higher in the November auction after three months of a consecutive reduction.
- The issue’s high discount rate rose. It was 0.50%—higher than 0.21% in the October auction. The high discount rate for November is the highest in 2015, so far.
Overall demand falls
The bid-to-cover ratio fell 2.2% to 4.03x month-over-month. The ratio averaged 4.2x in the auctions held in 2014. So far, in 2015, the ratio averaged 3.8x.
The bid-to-cover ratio measures the overall demand for the auction. The higher the ratio, the higher the overall demand is for the auction and vice versa.
Market demand rose
Unlike the overall demand, the market demand for the 52-week T-bills rose from a month ago. The auction saw the market demand rise to 52.5% of the competitive accepted bids in November—from 41.1% in the previous auction. The rise was due to higher indirect bids.
The “indirect bidders” category includes bids from overseas governments. The allotment to this category rose to 47.9% in November from 36.6% in October. Direct bids include bids from domestic money managers like Invesco (IVZ) and Wells Fargo (WFC). The percentage of direct bidder allotments rose to 4.6% in November from 4.5% in the October auction.