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Indirect Bidders

Indirect bidders are auction participants who bid through an intermediary, usually a primary dealer, rather than directly with Treasury. The category is mostly foreign: central banks, sovereign wealth funds and overseas institutional money. That is why the indirect award percentage is the market's standard proxy for foreign demand for US debt, imperfect as it is.

Foreign official money is sticky. These buyers hold to maturity and do not flip the paper back into the market. And a sustained slide in indirect awards revives the "are foreigners abandoning Treasuries?" question, which can pressure both bonds and the dollar.

Lately indirects have taken roughly 60 to 70% of 10-year auctions. There is no absolute bar to clear, though. An award is judged against the trailing average for its own tenor.

Say a $42 billion 10-year auction awards 70.2% to indirects against a six-auction average of 64.5%, and primary dealers are left with just 11%, near a record low. It tailed 0.3bp, but that is still a good auction. End users took the supply rather than dealer balance sheets, so there is little overhang waiting to be distributed in the days after.

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

Who are indirect bidders in a Treasury auction?

Anyone who bids through a primary dealer instead of bidding directly. The group is mostly foreign central banks and other overseas official accounts, so the share they win is read as a proxy for foreign appetite for US duration.

What does a high indirect share mean?

Real money showed up, and the auction is usually firm, because dealers are left with less paper to hedge and distribute. A low indirect share pushes the balance onto primary dealers, and that usually shows up as a tail. Helious publishes the indirect, direct and dealer split for every auction against the tenor's twelve-auction average on the auctions board.

Why do traders watch the indirect share on 10-year auctions?

The 10-year is where foreign demand for US duration shows up most clearly, so a sustained fall in the indirect share gets read as a verdict on that demand and on term premium. It is still only one number. The tail and the cover sit beside it on the 10-Year Note hub.
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