Bid-to-Cover Ratio
Definition
A Treasury auction metric defined as total bids received divided by the amount of securities offered. A ratio above 2.5x indicates strong demand; below 2.0x signals potential demand weakness. Declining bid-to-cover ratios — particularly in 10Y and 30Y auctions — are leading indicators of sovereign supply indigestion and rising term premium.
Formula / Calculation
B/C Ratio = Total Bids Received / Auction Offer Size
Why It Matters
The Aug 2023 30-year Treasury auction registered a 2.35x bid-to-cover — the weakest since 2011 — triggering a 20bps spike in 30Y yields within hours. Tracking auction tail (high yield vs pre-auction yield) alongside B/C ratio provides early warning of sovereign demand stress.
Related Metrics & Intelligence
Related Concepts
Sovereign Rollover Risk
The risk that a government cannot refinance its maturing debt obligations at affordable interest rates. Risk peaks when a large portion of outstanding debt is short-duration (bills), forcing frequent refinancing at prevailing market rates. The US faces a structural rollover challenge: approximately $9.2 trillion of debt matures within 12 months (as of 2024), representing ~33% of the total $34T debt stock.Term Premium
The excess yield that investors demand to hold a long-duration bond instead of rolling a series of short-term instruments. It compensates for duration risk (price sensitivity to rate changes), inflation uncertainty, and fiscal supply risk. The ACM Term Premium Model (NY Fed) estimates this component separately from the expected short rate path over the bond's life.Fiscal Dominance
A regime in which a government's debt burden is so large that monetary policy becomes subservient to fiscal needs — effectively forcing the central bank to keep rates low or monetise debt to prevent insolvency. Named by economist Thomas Sargent in 1981. Unlike monetary dominance (where the central bank controls inflation independently), fiscal dominance constrains the central bank's ability to raise rates even when inflation is elevated, because higher rates worsen debt sustainability.Track Bid-to-Cover Ratio live
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