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Bid-to-Cover Ratio

The bid-to-cover ratio is the total dollar value of bids submitted in a Treasury auction divided by the amount actually sold. A ratio of 2.5 means investors bid for two and a half times the paper on offer. It is the fastest read you get on whether an auction was wanted.

Traders watch it because it sums up appetite for duration at the yield on offer. A cover well above the recent average for that tenor means real sponsorship, and a stop-through often comes with it. A weak one suggests dealers had to absorb supply nobody else wanted, and a tail often shows up alongside.

As a rough guide, 10-year notes tend to cover around 2.4 to 2.6x and 4-week bills often print above 2.8x. The level only means anything set against that maturity's own history. Hold a bill cover up next to a bond cover and you have learned nothing.

Take a $42 billion 10-year note auction that pulls in $107.1 billion of bids. That is 107.1 divided by 42, so the cover is 2.55x against a trailing six-auction average of 2.48x. Modestly strong. If the same auction stops 1.2 basis points through the when-issued yield, the two together read as real demand rather than dealers reluctantly warehousing supply.

On the Helious desk right now

THE LAST FIVE 10-YEAR NOTE AUCTIONS, MEASURED BY HELIOUS
DATEHIGH YIELDBID-TO-COVERINDIRECT
4.834% 2.71 79.2%
4.683% 2.53 76.7%
4.580% 2.59 81.5%
4.538% 2.57 78.2%
4.468% 2.40 64.0%
Full history on the 10-Year Note hub.

FAQ

What is a good bid-to-cover ratio?

There is no single number, because it depends on the tenor. A 2.5 is strong for a 30-year bond and unremarkable for a 4-week bill. The only reading worth anything is against that tenor's own recent history. Helious puts every auction's cover next to the trailing twelve-auction average for that tenor on the auctions board.

What does bid-to-cover actually measure?

Total bids divided by the amount the Treasury sold. A 2.5 means $2.50 was bid for every $1 issued. That tells you how deep the demand was, not how good it was, which is why you read it next to the tail and the bidder split rather than on its own.

Is a falling bid-to-cover a warning sign?

Only if it keeps happening and a tail comes with it. One soft cover is noise. Several in a row on the same tenor, with the stop clearing above the when-issued yield, is the market asking to be paid a concession before it will take the supply down. Helious tracks the twelve-auction average per tenor and ranks each result against the full captured history.
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