Direct Bidders’ Share in the 13-Week Treasury Bills Auction Rises
Demand for Safe-Haven Treasuries Rises as the Stock Market Declines
13-week Treasury bills auction
The US Department of the Treasury auctioned 13-week Treasury bills (or T-bills) worth $24 billion on August 17. The amount of bills on offer was the same as than in the previous week and also the same since the March 23 auction. Overall auction demand rose by 4.7%, with the bid-to-cover ratio rising to 3.8x from 3.6x a week ago.
Mutual funds (or EMFs)—like the American Funds US Government Sec A and the Oppenheimer Limited-Term Government A (OPGVX)—have exposure to T-bills. Weekly returns for AMUSX and the OPGVX stood at 0.78% and 0.25%, respectively.
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 for the August 17 auction came in at 0.105%—lower than the 0.125% in the previous week.
Market demand rises marginally
Market demand for 13-week Treasury bills rose slightly from the previous week. The percentage of indirect bids fell to 37.9% of accepted bids from 40.5% a week ago. Unlike accepted indirect bids, direct bids rose. These bids, which had formed 4.8% of accepted bids in the previous week, rose to 11.5%. Direct bidders include domestic money managers—for example, State Street (STT).
Due to a rise in market demand, the share of primary dealer bids fell to 50.7% last week from 54.7% 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 and Co. (GS) and Citigroup Global Markets (C). A fall in the percentage of primary dealer bids shows strong fundamental market demand.
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