Econoday Report: 4-Week Bill Auction 4, 2007

2007 U.S. Economic Events & Analysis

Resource Center » U.S. & International Recaps | Release Dates | Why Investors Care | Today's Calendar

4-Week Bill Auction

Definition
Treasury bills are sold at public auctions every week. Competitive bids at these auctions determine the interest rate paid on each issue. Twenty-three primary dealers (as of July 2006) 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. 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. Why Investors Care

4-Week Bill Treasury Rate

3.100 %

Highlights
Demand was mild for today's oversize $29 billion 4-week bill auction where the bid-to-cover ratio was on the soft side at 2.32 for the lowest ratio since 1.11 on Aug. 21 when the Treasury, with a giant $32 billion offering, was scrambling to meet cash demand during the worst of the credit squeeze. Today's auction, reflecting continuing volatility in the credit market, was unusually sloppy with a very wide 35 basis point spread between high and low bids.

Trends

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 date on the chart is associated with the issue (or settlement) date of the Treasury security, which is on the Thursday of the week that the security is auctioned. Our grid tables show the auction date of the security, which is usually on Tuesdays.

Data Source: Haver Analytics