Yahoo Finance Why we’re seeing continued momentum in 1-month T-bill auctions
Why did demand fall for 3- and 6-month Treasury bills? (Part 2 of 5)
Last week’s one-month T-bill auction
Treasury bills (or T-bills) are short-term debt obligations issued by the U.S. government through a single-price auction, meaning all the competitive and non-competitive bidders are issued T-bills at a yield quoted by the lowest bidder. T-bills are quoted at a discount to face value.
Last week’s T-bill auctions included $25 billion one-month (or four-week) T-bills auctioned on April 15, plus $25 billion three-month (or 13-week) and $23 billion six-month (or 26 week) T-bills auctioned on April 14.
The one month T-bill’s (four week) demand remained high, as reflected in the bid-to-cover ratio of 5.00x for the April 15 auction compared to 4.98x for the April 8 auction. The bid-to-cover ratio compares the number of bids received in a Treasury auction with the number of bids accepted (or the amount of securities issued). The higher the ratio, the greater the demand for the auctioned securities. A bid-to-cover ratio of over 2 corresponds to a successful auction, while a ratio of less than 1 specifies an under-bought auction. The discount rate remained unchanged, at 0.025%.
Investors looking for ETFs investing in T-bills can invest in the SPDR Barclays Capital 1–3 Month T-Bill ETF (BIL) or iShares Barclays Short Treasury Bond Fund (SHV). Investors looking for short-term investment opportunities like T-bills but ready to take higher risk can invest in ETFs like the PIMCO Enhanced Short Maturity Exchange-Traded Fund (MINT). The PIMCO Enhanced Short Maturity Exchange-Traded Fund (MINT) invests in short-term securities such as T-bills, commercial papers, and mortgage-backed securities. Of the fund’s assets, 70% are deployed in securities with a maturity of less than a year. Financial services firms like Goldman Sachs (GS) and JP Morgan Chase (JPM) regularly issue short-term securities to meet their short-term funding requirements. Investors looking at a short-term horizon may invest in those securities.
To learn about the auctions of three-month T-bills held on April 14, read on to the next part of this series.
Browse this series on Market Realist:
