Direct Bidder Percentage in Treasury Auction from January 2009 to July 2010

(Click on the chart for clearer image.)

Direct Bidder Percentage used in the chart was calculated from the auction results published by the US Treasury Department. For bills, the 1st week of the month data were used. For notes, the July auctions will be held next week. The first-ever auction of 7-year note was February 2009.

Observation:

Many analysts and observers have noted the increased Direct Bidder participation in Treasury notes and bonds. However, the same is also true for shorter bills, as you can see in the chart.

There are a few volatile data series (2-year note, 7-year note), but the general average trend of Direct Bidder participation in Treasury auctions started to move up in February 2010. Notice that after April most Treasury securities featured here have over 10% Direct Bidder participation.

Events that may have influenced the trend:

In late January, the SEC announced new rules for money market funds. Money market funds would be required to hold certain percentage of safe and liquid securities such as Treasuries.

In early March, the SEC announced the implementation dates (end of May, end of June) for the new money market fund rules.

The Federal Reserve ended the quantitative easing on March 31.

Treasury Auctions from July 2009 to June 2010 (1-Year Anniversary Special)

(Click on the chart for sharper image.)

Observations:

After subdued fall and winter auctions, the treasury auctions spiked in March, due to the increased issuance of short-term bills, in particular, 56-day CMB (Cash Management Bill) to raise money for the use of Federal Reserve (and the money goes to the "Supplemental Financing Account" at the Federal Reserve; the balance as of June 30 is $199,965 million).

In addition to the 56-day CMB, there has been a noticeable increase in short-term bill issuance since January.

• Weekly issuance of 4-week bill went from $10 billion in January to $36 billion in the last week of June;
• Weekly issuance of 13-week bill went from $23 billion in January to $28 billion in June; and
• Weekly issuance of 26-week bill went from $25 billion in January to $28 billion in June.

The dotted line on the chart indicates the total amount of short-term bills each month.

The issuance of notes and bonds declined in June to below $180 billion per month for the first time since July 2009. 12-month average is $193.15 billion per month.

This is despite the Treasury Secretary Tim Geithner's remarks last October that the Treasury plans to lengthen the average maturity of debt from 49 months to 72 months.

Looking at the actual auction results for the last 12 months, particularly since the beginning of this year, the opposite seems to be true; the Treasury Department is borrowing using short-term debt to fund the government spending, which by nature is long-term.

Treasury Auction for June 2010

May 2010 Treasury Auction

April 2010 Treasury Auction Tally

March 2010 Treasury Auction

February 2010 Treasury Auction

Trends in Treasury Notes and Bonds Issuance

Between July 2009 and February 2010,

• 2-year note went from $42 billion per month for $44 billion per month (4.8% increase);
• 3-year note from $35 billion to $40 billion (14.3% increase);
• 5-year note from $39 billion to $42 billion (7.7% increase);
• 7-year note from $28 billion to $32 billion (14.3% increase);
• 10-year note from $19 billion to $25 billion (31.6% increase);
• 30-year bond from 11 billion to $16 billion (45.5% increase).

February 2010 saw the highest sale of Treasury notes and bonds in the 8 months that this blog has followed, despite February being the shortest month of the year.

4-Week Bill Auction August 2009 to February 2010

After extremely low amount auctions in January 2010, the 4-week bill auction in the first week of February is set for tomorrow at $17 billion. January's $10 billion per week was almost as low as the pre-crisis level in 2007.

Auction Result Chart January 2010

Treasury Issues from July to December 2009

Treasury notes and bond issues each month were constant around $200 billion, even when the short-term funding needs (Treasury bills) fluctuated.

13-Week Bill Auction Trend Since October 2009

The chart below plots Indirect Bidder (i.e. foreign buyers of Treasuries) Percentage on the left Y axis and Bid to Cover Ratio on the right Y axis for 13-week bill auctions since October 2009.

Note that both Indirect Bidder Percentage and Bid to Cover Ratio seem to have broken the respective support (around 25% for Indirect Bidder Percentage and 3.8 for Bid to Cover Ratio).

Treasury Auction December 2009

October 2009 Auction Tally

Auction Tally for September 2009

Auction Tally for August 2009

July Treasury Auctions, Year Over Year (2006-2009)

Treasury auctions in the month of July, year over year, from 2006 to 2009.