52-week Treasury bills auction
The US Treasury auctioned $20 billion worth of 52-week Treasury bills (or T-bills) on April 26, 2016. T-bills mature in a year or less. They are 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 held on April 26, 2016.
- The auction size was set at $20 billion, the same as the previous auction’s amount.
- The issue’s high discount rate was lower at 0.61% compared to 0.66% in the previous auction.
Overall demand jumped
The bid-to-cover ratio jumped 13.7% to 3.6x month-over-month. The ratio has averaged 3.5x so far in 2016. The bid-to-cover ratio measures the overall demand for the auction. The higher the ratio, the higher the overall demand for the auction and vice versa.
Market demand rose
Market demand for the 52-week Treasury bills rose from a month ago. Demand went up to 46.9% of competitive accepted bids in April from 38.1% in the previous auction.
The indirect bidders’ category includes bids from overseas governments. Allotment to this category rose to 44.4% in April from 32.2% in March. Direct bids include bids from domestic money managers like Invesco (IVZ) and Wells Fargo (WFC). The percentage of direct bidder allotment fell to 2.5% in April from 5.8% in the previous auction.
Mutual funds like the Prudential Government Income Fund – Class A (PGVAX) and the J Hancock Government Income Fund – Class A (JHGIX) have exposure to T-bills. PGVAX and JHGIX both were up by 0.4% last week.
Meanwhile, the iShares 1-3 Years Treasury Bond Fund (SHY), which has holdings in three-year Treasury notes, was up by 0.1% week-over-week.