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The September 8 auctions saw the Treasury issue $92B in 13-week bills and $79B in 26-week bills, a combined $171B in short-term debt. The 13-week bill cleared with a high investment rate around 3.89% to 3.90%, while the 26-week bill came in notably higher, landing between 3.89% and 4.02%.
Demand tells two different stories
The bid-to-cover ratio, which measures how many dollars of bids came in for every dollar of bills available, diverged meaningfully between the two tenors. For the 13-week bill, the ratio came in at roughly 2.61x. The 26-week bill attracted stronger interest at 2.88x.
Roughly 20.33% of bids in the 13-week auction were filled at the highest accepted rate, a figure that actually decreased compared to prior auctions. Meanwhile, the awarded-high percentage for the 26-week bill rose, suggesting the competitive pressure was more intense at that tenor.
Secondary market confirms the trend
In the secondary market, the 3-month yield sat at about 4.01% as of September 14. The 6-month yield was running around 4.15%.
Both figures represent a meaningful pickup from the auction clearing rates. The gap between auction and secondary market yields also suggests that investors who got filled at auction are, at least for now, sitting on paper that’s trading slightly cheaper than where they bought it.
What the yield curve is whispering
The bid-to-cover ratios, while still healthy above 2.5x, will be the canary in the coal mine. If those start slipping toward 2.0x or below, it would suggest that demand is struggling to keep pace with the government’s borrowing appetite.
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