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Auctions In Depth

To finance the public debt, Treasury sells Bills, Notes, Bonds, Treasury Inflation-Protected Securities (TIPS), and Floating Rate Notes (FRNs) to institutional and individual investors through public auctions. Beginning in February 2006, Treasury resumed the auction of Treasury Bonds. Treasury auctions occur regularly and have a set schedule. The auctions are announced in advance in most major newspapers and through press releases.

Treasury receives bids for Treasury marketable securities from institutions and individuals once a securities auction is announced. Submitters can change a bid until either the noncompetitive or competitive close for that auction. A bid must conform to the terms and conditions stated in the auction announcement and with the auction rules. Treasury reviews bids received on auction day up to the close of the auction to ensure that they conform to the rules. Noncompetitive bids postmarked timely will be accepted until issue day. Once an auction closes, no more bids or changes to those bids are allowed. If you bid in an auction and your bid is accepted, you are responsible for full payment.

Bidding in Auctions

Before bidding in a Treasury auction, you must decide to bid noncompetitively or competitively for Treasury Bills, Notes, Bonds, TIPS or FRNs. Noncompetitive and competitive bidding are detailed below.

Noncompetitive Bidding

  • Most individual investors, who do not consider themselves expert securities traders, can bid noncompetitively to ensure that the security amount requested is accepted in the auction.
  • You agree to accept the discount rate or yield set at the auction.
  • Treasury guarantees that you will receive the security for which you bid in the full amount requested up to the maximum bid limit.
  • Maximum bid limits are $10 million for Treasury Bills, Notes, Bonds, TIPS, and FRNs.
  • On auction day, the noncompetitive close time is usually earlier than the competitive close time. In most cases, the close time is 12 noon Eastern Time for receipt of noncompetitive bids and 1 PM Eastern Time for receipt of competitive bids.

Competitive Bidding

  • Institutional investors and others who are familiar with the securities market generally place their bids competitively.
  • Awards to a single customer may not exceed 35% of the total offering.
  • Competitive bidders specify the discount rate or yield they wish to receive.
  • You may or may not be awarded the security for which you bid competitively depending on how your bid compares to the discount rate or yield determined at the auction. If your bid is less than or equal to the high discount rate or yield determined at the auction, you will receive securities; however, your bid may be prorated if your bid equals the high rate/yield.

Placing Your Bids

You can place your bid directly through TreasuryDirect, or you can ask your broker/dealer or other financial institutions to bid on your behalf. All institutional investors that bid directly in Treasury auctions place their bids through TAAPS.