Econoday Economic Report: 4-Week Bill Auction April 24, 2018

2018 Economic Calendar

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4-Week Bill Auction

Released On 4/24/2018 11:30:00 AM For 4/24/2018 11:30:00 AM

Auction Results
Total Amount	$45 B
Bid/Cover	3.16
4-Week Bill Treasury Rate	1.680%

Highlights
Coverage, at 3.16, was solid for the weekly 4-week T-bill auction, where end investor demand was strong, with non-dealers taking down 50 percent of the $45 billion offering, their largest share of the last 3 auctions of the bill. The high discount rate, at 1.680 percent, was 5 basis points above last week's awarded rate but 4 basis points short of the long-term high of 1.720 percent set in March.

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