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4-Week Bill Auction  
Released On 12/4/2018 11:30:00 AM For 12/4/2018 11:30:00 AM
Auction Results
Total Amount$40 B 
Bid/Cover3.07 
4-Week Bill Treasury Rate2.320% 

Highlights
Coverage was solid for Tuesday's weekly T-bill auctions, at 3.07 for the 4-week the highest of the last 8 auctions and at 3.24 for the 8-week slightly above the average since the bill's introduction in mid-October. End investor demand was strong for both maturities, with non-dealers taking down 45 percent of the $40 billion 4-week offering, their largest share since October 30, and 60 percent of the $30 billion offered in the 8-week, their largest share yet for the new bill. Reflecting nearly unanimous expectations of a hike in the Fed funds rate in December, the high discount rate rose 5 basis points from the prior week to 2.320 percent for the 4-week and 4.5 basis points to 2.360 percent for the 8-week.

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
 
[Chart]

Data Source: Haver Analytics
 
[Chart]
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
 

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