US Treasury bills

While in many countries bills are bought in the primary market (from the government) at the bidding price, in the US 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 purchase price for their bills.

Table 14.4 gives the results of US T-bill auctions held during March 2014.

If we take the 26-week T-bill that was auctioned on 17 March 2014 below its par value at $99.959556, we can work out the figures in Example 14.4.

Table 14.4 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	04/03/14	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	03/04/14	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

Example 14.4

US Treasury bill

For US short-term investments (less than one year) the day count is actual/360. To calculate the discount yield, d, on the 26-week (182 days) US T-bill sold on 20 March 2014 at a discount price of $99.959556:

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Source: Arnold G.. FT Guide to Bond and Money Markets (Financial Times Series. Harlow.: FT Publishing International,2015. — 488 p.. 2015

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