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$40 Billion 3 Year Auction Closes At 1.223% High Yield, 50.40% Allotted At High
- Yields 1.223% vs. Exp. 1.229%
- Bid-To-Cover 2.98 vs. Avg. 2.92 (Prev. 2.62)
- Indirect Bid-to-Cover 1.32
- Indirects 60.9% vs. Avg. 57.70% (Prev. 54.15%)
- Alloted high 50.40%
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Can someone explain how the % allotted at the high can be interpreted?
I'll second that request. I lurk in the ignorant shadows on this site with constant Investopedia translations like a tourist with a "how to speak Mandarin Chinese" book in hand. Could someone point this bottom feeder to a primer on T-Bill auctions? I've found several good papers on the principles at large with auctions (including T-Bills), but for the most part they are beyond my current reach. I need a rosetta stone for understanding the report? (Indirect) Bid to Cover? Yield vs. Expected? Indirects? Alloted High? I can interpolate what I think it might be, but that is a far cry from understanding what it really is or what it means.
Thank you!
Soory, I was busy getting my ass handed to me today. Try this:
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=165334
Anyone remember the Salomon UST auction scandal?
I'm sure the same plays Salomon pioneered in that scandal are on page one of the Feds play book .
http://www.nytimes.com/1991/08/10/business/salomon-brothers-admits-viola...
Ah yes Paul Mozer. I remember being quite
impressed by this fellow. In Econ class
the Keynesians told us that the Central
Bank could not control long term interest
rates, they could only manipulate the
short rate.
In pops Mozer with total domination of the
long end of the curve. Who knows for how
long exactly he was doing it.
Treasury uses what is termed a Dutch auction -- see here http://en.wikipedia.org/wiki/Dutch_auction.
The "alloted at high" is rather meaningless; it is the percentage of those bidding the exact accepted price who will actually receive securities ... i.e. of those bidding exactly 99.712191, only 50.40% of them had their bid accepted.
Bid to Cover is simply: Amount-Bid / Amount-Accepted. It is a relatively good indicator of "demand".
"Indirects" is much more complex (as well as controversial since Treasury modified the definition earlier this year). It was (still is?) viewed as a proxy for "demand from foreign sources".
Great information. Thanks for the link.
So the primary dealers promise not to go wild on bids,
as long as the Fed QE program buys them back soon with a
tidy little profit for the PDs?
The word Kabuki comes to mind.
Kabuki theater played in a Potemkin village about a purely imaginary substance called "money."
Curious that the Primary Dealers have become so active. Are we expecting an unfolding of a quality trade? Or are banks aggressively slinking in on that final surge of reserve building before the fecal matter hits the wind vortex machine?
I choose option #2, which is a form of propitiation of the Gods of the Federal Reserve. Or kind of like inviting the Godfather for coffee against the day when you find yourself a few trillion short because, oh I don't know, an accounting rule change means the aforementioned waste substance hits the electrically powered spinning blades.
Does this $40b additional debt push treasury above the federal debt limit?
So lemme take a stab then...and thank you very much for the help; I know you have more things to do than to tutor me...
so they thought they would get 1.229% but only got a 1.223% yield?
I don't get bid to cover: if it is the amount bid / the amount accepted how does that equal 2.98? If they accepted $40B today, then they had bids for $116.8B? A higher bid to cover means that there is more interest or "demand"? How long a time line is the "average"? Historically is 2.98 trending towards more interest or less?
If indirects are foreign purchasers, then at this auction more foreign parties purchased treasuries than at the previous auction and more than the "average".
And with the "alloted at high" since there was nearly three times as many bids as treasuries to buy only about half of the highest bids were accepted? If there is no value in reporting that why put it in the headline?
Thank you sincerely for helping me to understand.
If you look at bids the amount bid was around 119.s billion and amount accepted was 40 billion so the bid to cover is actually 2.98.
The 50.4% allotment means the people who bid at exactly the high yield will get an allotment of 50.4% os their bid amount. Its usually not very significant ( significant only when the no of bids is low or when the difference between average and high yield is low meaning the auction had a short tail). So it is unusual why the person who wrote this would put that thing in headline.