Bid-to-cover ratio

What the number is

At a Treasury auction, bids arrive for more than the amount on offer. The bid-to-cover ratio is the value of those bids divided by the amount sold. An auction with a billion offered and nearly three billion bid has a ratio of about 2.7: demand was almost three times the supply.

How to read it

There is no absolute good number. Ratios move with the size of the auction, the maturity and the conditions of the week, so what matters is the comparison with recent auctions of the same security. A ratio noticeably below its recent range is reported as weak demand, and it can push yields up at the margin.

Where the ratio can mislead

A high ratio does not by itself mean healthy demand. Primary dealers are expected to bid at every auction, so the headline figure includes bids that would not exist at that price. The more informative detail usually sits next to it: how much of the auction went to indirect bidders, which include foreign central banks, and how much was left with the dealers who must take up the remainder.