Econoday Report: 4-Week Bill Auction 15, 2008

2008 U.S. Economic Events & Analysis

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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 primary dealers (as of November 30, 2007) 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

0.100 %

Highlights
The gripping demand for cash is nowhere more evident than in the front-end of the Treasury market. The stop-out rate for the week's 4-week T-bill auction was 0.100 percent with both the low and median bids at a difficult to explain -- zero percent. Fed Chairman Ben Bernanke, in comments today, warned that it will take "some time" for the credit markets to unfreeze. In the meantime, demand for cash will stifle the availability of credit.

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 | Consensus Data Source: Market News International and Thomson Financial