Market demand jumped at the 13-week Treasury bills auction
Analyzing why excellent economic growth hurt Treasuries (Part 11 of 12)
13-week Treasury bills auction
The US Department of the Treasury auctioned 13-week, or three-month, Treasury bills (BIL) (MINT), or T-bills, worth $24 billion on December 22. The auction amount hasn’t changed for several months. Auction demand was lower in the week. The bid-to-cover ratio continued to fall for the third successive week. It was 3.8x—compared to ~4x the previous week.
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 December 22 auction came in much higher at 0.55%—compared to 0.035% in the previous week.
Market demand nearly doubles
Market demand nearly doubled in the week—compared to the previous week’s auction. The percentage of indirect bids jumped from 11.3% to 30.8% week-over-week. Direct bids remained flat at 9.7%—compared to the previous week. Direct bids include domestic money managers—for example, State Street Corp. (STT).
The share of primary dealer bids fell to 59.5% from 79% 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. They clean up excess supply. They include firms like Goldman Sachs & Co. (GS) and Citigroup Global Markets (C). GS and C are part of the SPDR MSCI World Quality Mix ETF (QWLD) and the iShares Core S&P 500 ETF (IVV). A decrease in the percentage of primary dealer bids shows stronger fundamental market demand.
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