26-week T-bills auction
The U.S. Department of the Treasury held the weekly auction for 26-week Treasury bills, or T-bills, on April 18. T-bills worth $24 billion were on offer—the same as the previous week.
The bid-to-cover ratio rose marginally by 0.5% from the previous week to 3.9x. So far in 2016, the bid-to-cover ratio has averaged 4.0x. The ratio depicts the overall demand for the auction.
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 April 18 auction came in at 0.35%—the same as the previous auction.
Market demand rose
Fundamental market demand was up last week. Accepted indirect bids rose to 42.7% week-over-week from 34.9% in the previous week. Indirect bids are bids from foreign central banks. They depict international demand for the auction.
Due to higher market demand, the share of primary dealer bids fell to 51.3% of the auction from 56.6% in the previous week. Primary dealers are a group of 22 authorized broker-dealers. They’re obligated to bid at US Treasury auctions and take up excess supply. They include firms like Goldman Sachs (GS) and Citigroup (C). A fall in the percentage of primary dealer bids indicates a rise in fundamental market demand.