US Treasury bills
US Treasury bills are sold by Treasury Direct (www.treasurydirect.gov), which is part of the US Department of the Treasury. They range in maturity from a few days to 52 weeks, with 4-week (28 days), 13-week (91 days) and 26-week (182 days) bills being the most common.
They are sold at a discount to par value by auction every week, except for the 52-week bills which are auctioned every 4 weeks. The buyers include securities' houses, banks, institutional investors and private investors. The bidders can bid for the bills in two ways (they have to choose one route or the other at the outset):• Competitive. This is where potential buyers specify the minimum discount rate or yield they are willing to accept. No single bidder may bid for more than 35% of the total on offer. These bids may be:
a Accepted in the full amount the bidder wanted if the discount rate they specified is less than the discount rate set by the auction. This threshold rate is determined by the Treasury, which, when all the bids are gathered in, sets the level of discount that will shift the bill quantity required. Competitive bids are accepted in ascending order until the quantity reaches the amount offered.
b Accepted only partially (the bidder does not receive the full amount of bills bid for) if their bid is the same as the cut-off level that sells the amount of bills the government is trying to sell in that auction.
c Rejected if the bidder stated a level of discount that is higher than that set at the auction.
• Non-competitive. The buyer agrees to accept the rate or yield which is set at the auction, in other words, the price set by other investors. The offer to buy can be submitted via the internet. With a non-competitive bid buyers
Table 9.5 US Treasury bills auctioned March 2014
| CUSIP | Security term | Auction date | Issue date | Maturity date | Price per $100 | Average/ median discount rate | Bid to cover ratio |
| 912796DE6 | 13-week | 03/31/14 | 04/03/14 | 07/03/14 | 99.988625 | 0.04% | 4.83 |
| 912796DX4 | 26-week | 03/31/14 | 04/03/15 | 10/02/14 | 99.967139 | 0.06% | 5.18 |
| 912796CJ6 | 4-week | 03/25/14 | 03/27/14 | 04/24/14 | 99.996500 | 0.04% | 4.65 |
| 912796BP3 | 13-week | 03/24/14 | 03/27/14 | 06/26/14 | 99.987361 | 0.04% | 4.61 |
| 912796DW6 | 26-week | 03/24/14 | 03/27/14 | 09/25/14 | 99.962083 | 0.07% | 5.05 |
| 912796CH0 | 4-week | 03/18/14 | 03/20/14 | 04/17/14 | 99.995333 | 0.06% | 4.27 |
| 912796DD8 | 13-week | 03/17/14 | 03/20/14 | 06/19/14 | 99.987361 | 0.05% | 4.42 |
| 912796CB3 | 26-week | 03/17/14 | 03/20/14 | 09/18/14 | 99.959556 | 0.08% | 4.86 |
| 912796CG2 | 4-week | 03/11/14 | 03/13/14 | 04/10/14 | 99.995722 | 0.05% | 4.11 |
| 912796DC0 | 13-week | 03/10/14 | 03/13/14 | 06/12/14 | 99.987361 | 0.05% | 4.76 |
| 912796DV8 | 26-week | 03/10/14 | 03/13/14 | 09/11/14 | 99.959556 | 0.08% | 4.97 |
| 912796BA6 | 4-week | 03/04/14 | 03/06/14 | 04/03/14 | 99.996500 | 0.04% | 3.93 |
| 912796DP1 | 52-week | 03/04/14 | 03/06/14 | 03/05/15 | 99.878667 | 0.12% | 4.85 |
| 912796DA4 | 13-week | 03/03/14 | 03/06/14 | 06/05/14 | 99.987361 | 0.04% | 5.02 |
| 912796DS5 | 26-week | 03/03/14 | 03/06/14 | 09/04/14 | 99.959556 | 0.08% | 4.46 |
Source: www.treasurydirect.gov
are guaranteed to receive the full amount of bills they wanted up to a maximum of $5 million. This is a good method for individual investors who are not expert security traders and therefore can avoid calculating bill discount rates.
All bidders, competitive and non-competitive, receive the same discount rate, and therefore the same yield, as the highest accepted bid and so pay the same amount for their bills (contrasting with UK bills, where bidders pay the amount at which they tendered).
Individuals may bid and the minimum purchase is a lowly $100, unlike in the UK where the minimum bid is £500,000 and individuals may not bid themselves but hold UK Treasury bills only through one of the approved bidders. Table 9.5 gives the results of US T-bill auctions held during March 2014. US T-bill interest is calculated on an actual/360 annual basis.