uploads/// Year Treasury Note Issuance versus Bid Cover Ratio

Overall Demand Rose for 10-Year Treasury Notes


Dec. 14 2015, Published 2:37 p.m. ET

Ten-year Treasury notes

The U.S. Department of the Treasury conducts an auction of ten-year Treasury notes (or T-notes) once every month. The yield on ten-year T-notes is considered to be a benchmark in financial markets.

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Key takeaways

  • On December 9, 2015, $21 billion worth of ten-year Treasury notes were auctioned. This was $3 billion lower than the previous month.
  • The coupon rate came in at 2.3%.
  • The high yield stood at 2.2%, lower compared to 2.3% in the previous month’s auction.
  • The bid-to-cover ratio was up to 2.64x compared to the previous month’s 2.58x. This ratio depicts the overall demand for the auction.

Yield analysis

The yield on the ten-year note fell by two basis points in the secondary market from the previous day to 2.2% on December 9.

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Demand analysis

Fundamental market demand nudged down for ten-year T-notes from 74.8% in November to 74.0% in December. The share of indirect bidders rose slightly to 62.0% in December from 60.5% in November. Direct bids fell to 12.1% in December from 14.3% in November.

Indirect bids include bids from foreign central banks, while direct bids are from domestic money managers such as State Street (STT) and BlackRock (BLK).

Due to a marginal fall in market demand, the share of primary dealers rose to 26.0% in December from 25.2% in November. Primary dealers act as market makers for the auctioned securities. They take up the excess supply of securities. They include financial institutions such as Morgan Stanley (MS) and Credit Suisse (CS).

Investment impact

The weekly returns of the T. Rowe Price US Treasury Long-Term Fund (PRULX) and the JHancock Government Income A Fund (JHGIX) were up by 2.3% and 0.46%, respectively.


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