The US treasury sells $13 billion of 20 yr bonds at a excessive yield of 4.927%

High Yield

The high yield is the highest yield accepted at the auction and becomes the yield awarded to all successful bidders.

• Higher-than-expected yield = weaker demand.
• Lower-than-expected yield = stronger demand.

Tail

The tail measures the difference between the auction’s high yield and the yield where the bond was trading just before the auction (the “when-issued” yield).

• Positive tail (high yield above WI yield) = weaker auction.
• Negative tail or stop-through (high yield below WI yield) = stronger auction.

Example:

• WI yield: 4.50%
• Auction high yield: 4.53%
• Tail: +3 basis points (weak)

Bid-to-Cover Ratio

The bid-to-cover ratio measures total bids received relative to the amount offered.

Formula:
Bid-to-Cover = Total Bids ÷ Amount Offered

Example:

• Treasury sells $22 billion
• Receives $55 billion in bids
• Bid-to-cover = 2.50

Higher ratios generally indicate stronger demand.

Direct Bidders (%)

Direct bidders submit bids directly to the Treasury.

Typically includes:

• Domestic money managers
• Pension funds
• Mutual funds
• Some hedge funds

A higher direct percentage often suggests strong domestic investor interest.

Indirect Bidders (%)

Indirect bidders are primarily:

• Foreign central banks
• Sovereign wealth funds
• Foreign institutions

This is often the most closely watched category.

A high indirect take is usually viewed as a positive sign because it indicates strong foreign demand for U.S. debt.

Dealers (%)

Primary dealers are required to participate and buy any securities not taken by others.

Examples include:

• JPMorgan Chase
• Goldman Sachs
• Bank of America

A high dealer allocation is generally viewed as a negative because it means investors were less willing to absorb the supply.

Quick Auction Scorecard