| Indirect Bidders Gun-Shy for Four-Week Treasury Bills on September 1 | |
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The Market Demand for Treasury Bills as Stock Market Falls (Continued from Prior Part) September 1 Four-week T-bills auction
The US Department of the Treasury conducted the weekly auction for four-week T-bills (Treasury bills) on September 1, 2015. The issuance was $35 billion—$5 billion lower than the previous week.
The bid-to-cover ratio for these bills, a figure that depicts overall demand, rose 6.4% from the previous week to 3.5x. Coverage at the four-week T-bills auction has averaged 3.7x so far in 2015, which is down from 4.4x for all the auctions held in 2014.
The high discount rate for the September 1 auction came in at zero. In the previous a week the high discount rate was 0.045%.
Market demand dives
Market demand for the four-week Treasury bills declined from the previous week. The percentage of indirect bids fell to 8.9% from 26.4% week-over-week. Indirect bidders include foreign central banks.
Domestic investors’ interest in the auction was also down from the previous week. The percentage of direct bids fell to 3.0% from 3.7% week-over-week. Direct bidders include domestic money managers—for example, BlackRock (BLK) and Wells Fargo & Company (WFC).
The share of primary dealer bids rose to 88.1% from 69.9% 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 JPMorgan Chase & Company (JPM) and Morgan Stanley (MS). The rise in the share of primary dealers indicates a weak fundamental demand for the auction.
Investment Impact
Mutual funds, such as the J Hancock Government Income Class A (JHGIX) and the American Funds US Government Sec A (AMUSX) invest in T-bills. The JHGIX provided a week-over-week return of 0.04%, while the weekly return of the AMUSX came in at 0.35%.
For more bond market trends and analysis, please visit Market Realist’s Fixed Income page.
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