13-week Treasury bills auction
The US Department of the Treasury auctioned 13-week Treasury bills, or T-bills, worth $26 billion on October 26. The amount on offer was the same as the previous week’s auction.
The overall auction demand, as represented by a bid-to-cover ratio, was lower by 4.2% in the week. The bid-to-cover ratio fell to 3.4x—the lowest YTD (year-to-date)—compared to 3.5x a week ago.
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 October 26 auction came in at 0.02%. It was higher than 0.015% in the previous week.
Market demand fell
The market demand for the three-month T-bills fell to 27.5% of the accepted bids last week—compared to 31.5% in the previous week.
The percentage of indirect bids fell from 26.2% to 21.9%. The direct bids rose. These bids formed 5.3% of the accepted bids in the previous week. They rose to 5.6%. Direct bids include domestic money managers—for example, State Street (STT) and BlackRock (BLK).
The share of primary dealer bids rose from 68.5% in the previous week to 72.5%. 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 Goldman Sachs (GS) and Citigroup (C). A rise in the percentage of primary dealer bids shows weak fundamental market demand.