Bid-to-Cover Ratio
Total bids received at a Treasury auction divided by the amount sold — a key gauge of demand strength for government debt.
Formula
Bid-to-Cover = Total Bids Submitted / Amount Offered
The bid-to-cover ratio measures auction demand: a ratio of 2.5 means investors bid $2.50 for every $1.00 of bonds issued. A high ratio signals strong demand; a low ratio signals weak demand and potential difficulty funding government debt at current rates.
Historical averages vary by tenor — 10-year T-Note auctions typically see bid-to-cover ratios of 2.3–2.8. A materially lower reading (e.g., 2.1) triggers yield spikes as the market recalibrates the clearing price for Treasuries.
Weak demand at Treasury auctions — especially when combined with large issuance calendars — is a catalyst for bear steepening: yields rise at the long end as the market prices in higher supply risk and reduced foreign and institutional demand.
Related Terms
Curve Steepening
When the yield spread between long- and short-term Treasuries widens — usually as long yields rise faster than short yields, or short yields fall faster.
AdvancedPrimary Dealer
An elite bank or broker-dealer authorized to trade directly with the Fed and required to participate in every Treasury auction.
AdvancedTerm Premium
The extra yield investors demand to hold longer-term bonds instead of rolling short-term bills — compensation for duration, inflation uncertainty, and supply risk.
AdvancedTreasury Auction
The regular process by which the U.S. government sells new Treasury securities to investors via competitive and non-competitive bidding.
IntermediateTreasury Security
Debt issued by the U.S. federal government through the Treasury Department — the benchmark risk-free asset in global finance.
Beginner