Diverging Policymaker Views Move Treasuries in April (Part 7 of 8)
13-week Treasury bills auction
The U.S. Department of the Treasury auctioned 13-week Treasury bills, or T-bills, (BIL) (MINT) worth $24 billion on April 6. The amount on offer was the same as it was at the previous week’s auction. Overall auction demand rose by 8.5%, with the bid-to-cover ratio rising to 4.2x compared to 3.9x a week ago.
Yield analysis
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 at the April 6 auction came in at 0.020%, lower than 0.035% in the previous week.
Market demand falls
Market demand fell after having risen the previous week, led by a sharp rise in indirect bids. The percentage of indirect bids fell to 19.4% from 26.3% a week ago. On the other hand, direct bids rose. These bids, which had formed 5.8% of accepted bids the previous week, rose to 6.4%. Direct bidders include domestic money managers such as State Street (STT).
Due to a fall in market demand, the share of primary dealer bids rose to 74.2%, up from 67.9% the previous week. Primary dealers are a group of 22 broker dealers authorized by the Fed. They’re obligated to bid at Treasury auctions and take up the excess supply. They include firms such as Goldman Sachs (GS) and Citigroup Global Markets (C). A rise in the percentage of primary dealer bids shows weak fundamental market demand.
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