Treasuries Fall as the Fed's Lift-Off May Soon Turn into Reality
Four-week Treasury bills auction
The United States Department of the Treasury conducted the weekly auction of four-week Treasury bills (or T-bills) on December 1. The issuance was $45 billion, or $5 billion lower than a week ago.
Overall demand fell, market demand surged
The bid-to-cover ratio for these bills, depicting overall demand, fell from 3.2x to 3.1x week-over-week. Coverage of the one-month T-bills auction has averaged 4.2x so far in 2015, down from 4.4x for all the auctions held in 2014.
The high discount rate for the November 3 auction came in at 0.19%, or higher than 0.12% in the previous week and also the highest year-to-date.
Market demand for the four-week Treasury bills rocketed from the previous week. It rose to 31.8% last week from 24.0% in the week before that.
The percentage of accepted indirect bids rose from 16.6% to 20.1% week-over-week. Indirect bidders include foreign central banks. Domestic investors’ interest in the auction also rose last week, and the percentage of direct bids rose from 7.4% to 11.7% week-over-week. Direct bids include domestic money managers, for example, BlackRock (BLK) and Wells Fargo (WFC). The share of primary dealer fell from 76.0% in the previous week to 68.2%.
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 JPMorgan Chase (JPM) and Morgan Stanley (MS). The fall in the share of primary dealers indicates strong fundamental demand.
Investment impact
Mutual funds like as the Oppenheimer Limited-Term Government Fund -Class A (OPGVX) and the J Hancock Government Income Fund – Class A (JHGIX) provide exposure to Treasury-bills.
The weekly return of the OPGVX rose by 0.03%. Also, the weekly return of the JHGIX came in negative at 0.2%.
For more mutual fund trends and analysis, please visit Market Realist’s Mutual Fund page.
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