Econoday Report: 6-Month Bill Auction 20, 2008

2008 U.S. Economic Events & Analysis

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6-Month Bill Auction

Definition
Treasury bills are sold at public auctions every week. The 6-month bill is also known as the 26- week bill. 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. Six-month bills are announced on Thursday for auction the following Monday and issued (settled) on Thursday. If a Monday is a banking holiday, the bills are auctioned on Tuesday. Why Investors Care

6-Month Bill Treasury Rate

1.800 %

Highlights
Demand is thankfully easing for T-bills as bank-to-bank lending picks back up and demand for safety eases. Bid-to-cover ratios for today's 3- and 6-month auctions were substantially lower than last week with stop-out rates significantly higher. Also easing demand is the flood of special Treasury supply including $35 billion of 225-day cash management bills auctioned earlier in the session.

Trends

The 6-month bill rate is usually similar to the federal funds rate target; often when bond investors expect a rising rate environment, it is higher than the funds rate, but when investors expect rates to decline, it will be lower than the funds rate target. The 6-month bill rate depicted in this chart represents the high discount rate from the Treasury's weekly auction on Mondays. 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 Mondays.

Data Source: Haver Analytics | Consensus Data Source: Market News International and Thomson Financial