US bills are sold in single-price auctions. Every successful bidder pays the same price, set by the highest rate needed to sell the full offering.
Two kinds of bid
- Noncompetitive: you accept whatever rate the auction sets, and you are awarded your full amount up to a limit. This is currently 10 million USD per auction for bills.
- Competitive: you state the lowest rate you will accept. You may receive all, part or none of what you bid for. A single bidder’s award is limited to 35% of the offering.
How the rate is set
- Noncompetitive bids are awarded first.
- Competitive bids are sorted from the lowest rate to the highest.
- Bids are accepted in that order until the offering is filled.
- The last rate needed is the high rate, and every accepted bid pays the price at that rate.
- Bids at the high rate may be partially filled. Bids above it receive nothing.
Try it: set the offering size in a fictional auction
| Bid rate | Bid | Filled | Result |
|---|---|---|---|
| 3.90% | 30 | 30 | Filled |
| 3.95% | 30 | 30 | Filled |
| 4.00% | 25 | 5 | Partly filled |
| 4.05% | 25 | 0 | Not filled |
| 4.10% | 20 | 0 | Not filled |
- High rate
- 4.00%
- Price everyone pays
- 98.988889
Fictional bids for a 91-day bill, with 5 units of noncompetitive bids filled first.
Bid-to-cover is the total amount bid divided by the amount accepted. It describes participation in that auction, and on its own it does not tell you where rates are heading.
Key points
- All winners pay one price, set by the high rate.
- Noncompetitive bids are filled first, at the rate the auction sets.
- A competitive bid above the high rate receives nothing.
General information only. It is not investment, legal or tax advice. Details vary by market and can change, so check the issuer’s current rules.