Econoday Economic Report: 4-Week Bill Auction January 30, 2018

2018 Economic Calendar

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4-Week Bill Auction

Released On 1/30/2018 11:30:00 AM For 1/30/2018 11:30:00 AM

Auction Results
Total Amount	$25 B
Bid/Cover	2.76
4-Week Bill Treasury Rate	1.440%

Highlights
Coverage, at 2.76, was soft for the weekly 4-week T-bill auction, where demand from end investors was tepid despite the smaller than usual $25 billion size of the offering. Non-dealers took down just 24 percent of the reduced supply, their smallest share this year. The 1.440 percent high discount rate was a sharp 21 basis points above last week's awarded rate, most likely reflecting increased expectations of a hike in the Fed funds rate.

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

Data Source: Haver Analytics

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