A measure of auction strength is the bid-to-cover ratio. This measures the dollar volume of bids relative to that being sold. That is, demand relative to supply. The higher bid-to-cover ratio, the greater the demand.
The bid to cover ratio of today's 7-year note auction was 2.85. This reflects good demand. This is better than December's auction of 2.72. Look inside the numbers reflects a continuation of strange trend towards increased direct bidding. Direct bids, or non-primary dealer submitters bidding for their own house accounts jumped from 4.5% in December to 9% in January. This trend, as discussed in the ft article, Treasury bids drive speculation reflects someone trying to hide their interest in own these auctions. These auction results will only add to the speculation.
Source: Treasury January Auction
Source: Treasury December Auction
Definition: Bid-To-Cover Ratio
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