The U.S. Treasury conducts auctions to sell new government securities on a regular schedule. Bills (maturities up to 1 year) are sold weekly, notes (2-10 years) and bonds (20-30 years) are sold monthly. The auction process determines the yield at which the government borrows.
Treasury auctions use a single-price, sealed-bid format:
- Competitive bidders (primary dealers, institutions, funds) submit bids specifying the yield they require
- Non-competitive bidders (retail investors, small institutions) accept whatever yield the auction produces
- Awards are filled from the lowest yield bid upward until the offering amount is reached
- All winners pay the same price (the highest accepted yield)
Four key metrics gauge auction demand:
- Bid-to-cover ratio: total bids divided by the amount sold. Higher means stronger demand.
- Tail: the difference between the auction high yield and the pre-auction when-issued yield. A small or negative tail indicates strong demand.
- Indirect bidders: share awarded to foreign central banks and institutions (bidding through primary dealers). Higher indirect participation signals strong international demand.
- Direct bidders: share awarded to institutions bidding directly with Treasury.
Auction results move markets. A weak auction (large tail, low bid-to-cover) can push yields higher across the curve, while a strong auction can compress yields. The auctions tool on this site grades each auction from D- to A based on normalized historical performance across all four metrics.