6 Month Bill Bid-To-Cover Plunges To 2nd Lowest This Decade Amid Fleeing Demand

While demand for US Treasurys remains brisk at primary auctions (if more questionable in the secondary market where we recently learned that Russia dumped half of its Treasury holdings, or almost $50BN, in April), the same can hardly be said for the short-end of the market, where moments ago we saw what happens to auction demand in a time of rapidly rising rates.

As shown in the chart below, while the yield on 6 Month Bills auctioned off today came in largely as expected at 2.075%, the demand did not, and after a solid Bid to Cover of 3.59 last week, today's 6M auction suffered one of its biggest drops on record, tumbling to just 2.78, with $116.9BN in bids tendered for $42BN in paper, down sharply from $150.6BN on June 11. This was the second lowest Bid To Cover this decade, and only better than the 2.74 BTC printed on the February 12, 2018 auction.

6 Month T-Bill Bid To Cover

And with both T-Bill issuance continuing to surge, and rates rising, two things are certain: not only will the Libor-OIS spread resume blowing out amid the continued surge in short-term supply, but demand will continue slide, although the good news is that we are still well off from the record lows, in which auctions were only 1.5x covered at the start of the century. That said, who knows: perhaps the break in the bond market will begin with a failed Bill auction as the US Treasury finds it increasingly difficult to roll over short-term debt.


LaugherNYC JRobby Mon, 06/18/2018 - 12:54 Permalink

So a short tail auction with over 2x cover in a two-increase before year end market??

Oh, yeah, Tyler, that’s essentially a failed auction??


As always, the worse things get in international markets, the more the dollar bid.

with the curve flattening, wither the short end goes up or the long end goes down...

This is what the Fed wants. And the Fed always gets what it wants, at least short term

In reply to by JRobby

Ron_Mexico bshirley1968 Mon, 06/18/2018 - 13:33 Permalink

don't they need to have gotten the guns by that time, or was that the plan all along?  I guess it's kind of a genius plan. That is, the Libtards 'n Dims can say "well we told ya nobody needed all them guns, now lookee what's done happened.  Don't blame us."  And, as is so often true with their ilk, they'll be about a little less than half right.

In reply to by bshirley1968

boostedhorse Mon, 06/18/2018 - 12:23 Permalink

Wow, if thats the biggest issue regarding the economy is there any point in owning gold?

We've had inflation increasing, gold has gone nowhere while rates have gone up. When inflation weakens, gold will go nowhere. Should economy "crash", gold will crash with it initially. Should economy boom, gold will go nowhere.

I guess a revisit of 2015 low is in order, I'm getting out and will get in again at the lows and into miners instead of phys.

Money_for_Nothing Mon, 06/18/2018 - 12:24 Permalink

Surplus trade nations are no longer running as big a surplus. Otherwise they would be buying US Treasuries, $USD denominated bonds, and $USD denominated equities. Or even overpriced US real estate. What else are they going to do with surplus $USD?

Salmo trutta Mon, 06/18/2018 - 13:56 Permalink

"In 2015, the average daily trading volume of the treasury securities of the United States was  490.1 billion U.S. dollars." Russia's recent dumping of $47 billion in US debt is less than 10% of one day's volume  at 2015 levels of trading. Try not to panic."

Banks are short of liquidity this week. Will reverse by the 6/20/18.