Econoday Economic Report: 52-Week Bill Auction July 24, 2012

2012 Economic Calendar

Resource Center » U.S. & Intl Recaps | Event Release Dates | Event Definitions | Today's Calendar

52-Week Bill Auction

Released On 7/24/2012 11:30:00 AM For 7/24/2012 11:30:00 AM

Auction Results
52-Week Bill Rate	0.175%
Bid/Cover	4.71
Total Amount	$25 B

Highlights
Troubles in Europe are raising demand for US Treasuries reflected in very strong 4.71 coverage for today's 52-week T-bill auction.

Definition
Treasury bills are sold at public auctions every week. The 12-month bill is also known as the 52-week bill. Competitive bids at these auctions determine the interest rate paid on each issue. A group of securities dealers, known as primary dealers, are authorized and obligated to submit competitive tenders at Treasury auctions. Dealers can hold the bills, resell the bills to their clients or trade them with other securities firms. Typically, the New York Fed approves about 20 securities firms to be primary dealers but that number dropped sharply during the recent financial crisis as some were merged into other firms or went bankrupt. The Fed has been rebuilding that number regularly and the latest list can be found here: http://www.newyorkfed.org/markets/pridealers_current.html Since these are public auctions, the Treasury must announce the size, date and time of the auction every week. 52-week bills are announced on Thursday for auction the following Monday and issued (settled) on Thursday. If a Monday is a banking holiday, the bills are auctioned on Tuesday. (Department of the Treasury) Why Investors Care

Data Source: Haver Analytics

The yield on the 52-week Treasury bill is typically somewhat higher than the federal funds rate except when markets expect upward or downward changes in monetary policy through the fed funds rate. Now, both the effective fed funds rate and the 52-week T-bill both are just barely above zero due to the Fed’s rate cut going back to December 16, 2008. Also, the Fed in recent FOMC statements and minutes indicated that the effective fed funds rate likely would remain low for an extended period through late 2014. This chart shows the average monthly 52- week bill yield, not the latest auction results.
Data Source: Haver Analytics