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4-Week Bill Auction  
Released On 12/6/2018 11:30:00 AM For 12/6/2018 11:30:00 AM
Auction Results
Total Amount$40 B 
Bid/Cover3.04 
4-Week Bill Treasury Rate2.365% 

Highlights
Coverage was mixed for Thursday's weekly T-bill auctions, at 3.04 for the 4-week the second highest of the last 8 auctions but at 3.01 for the 8-week the lowest since the bill's introduction in mid-October. End investor demand was also mixed, with non-dealers taking down 46 percent of the $40 billion 4-week offering, their largest share since October 30, but just 42 percent of the $30 billion 8-week offering, their smallest share of the last 5 auctions. Reflecting strong expectations of a hike in the Fed funds rate, the high discount rate rose 4.5 basis points to 2.365 percent for the 4-week and 3 basis points to 2.390 percent for the 8-week. The second auction of the same bills in the week marks the transition to the new issuance schedule, with previously held Tuesday weekly auctions of the bills moved to Thursdays.

Definition
Treasury bills are sold at public auctions every week. Competitive bids at these auctions determine the interest rate paid on each issue. A group of securities dealers, known as primary dealers, are authorized and obligated to submit competitive tenders at Treasury auctions. Dealers can hold the bills, resell the bills to their clients or trade them with other securities firms. Typically, the New York Fed approves about 20 securities firms to be primary dealers but that number dropped sharply during the 2008 financial crisis as some were merged into other firms or went bankrupt. The Fed has been rebuilding that number regularly and the latest list can be found here. Since these are public auctions, the Treasury must announce the size, date and time of the auction every week. Four-week bills are announced on Monday for a Tuesday auction and are issued (settled) on Thursday of the same week. If a Monday is a banking holiday, the bills are auctioned on Wednesday. (Department of the Treasury)  Why Investors Care
 
[Chart]

Data Source: Haver Analytics
 
[Chart]
The 4-week note was instituted to replace the necessity for sporadic cash management bills. This weekly auction is more predictable for investors. Predictability in the Treasury market is a highly rate feature that promotes demand for these bills. The 4-week bill rate depicted in this chart represents the high discount rate from the Treasury's weekly auction on Tuesdays. It only represents one moment in time, and is not an average of daily numbers. The dates on the chart and the grid are the auction dates of the security, which are usually on Tuesdays.
Data Source: Haver Analytics
 

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