uploads///Weekly T Bill Issuance and Bid Cover Ratio

Indirect Bidders Seem Keen at the 13-Week Treasury Bills Auction


Oct. 11 2020, Updated 12:33 p.m. ET

13-week Treasury bills auction

The US Department of the Treasury auctioned 13-week Treasury bills, or T-bills, worth $24 billion on May 26. The amount on offer was unchanged from the previous week. Overall auction demand surged by 6.8%, with the bid-to-cover ratio rising to 4.7x from 4.4x a week ago.

The PIMCO Enhanced Short Maturity ETF (MINT) and the SPDR Barclays 1-3 Month T-Bill ETF (BIL) have exposure to T-bills.

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Yield analysis

T-bills don’t pay a coupon. They’re offered at a discount to face value. They’re redeemable at par upon maturity. The high discount rate for the May 26 auction came in at 0.015%—unchanged from the previous week.

Market demand rises

Market demand for 13-week Treasury bills rose, led by a rise in allotted indirect bids. The percentage of indirect bids rose to 25.1% of the accepted bids, up from 21.6% a week ago.

Direct bids also rose. These bids, which had formed 4.7% of accepted bids in the previous week, rose to 5.5%. Direct bidders include domestic money managers such as State Street (STT).

With rising market demand, the share of primary dealer bids fell to 69.4% last week, down from 73.7% in the previous week. 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 Global Markets (C). A fall in the percentage of primary dealer bids shows strong fundamental market demand.


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