US 6-month and 3-month bill yields approach 4% as demand climbs

The US Treasury’s routine Monday auction just got a little less routine. Both the 3-month and 6-month bill yields are brushing up against the 4% mark, a level that tends to focus minds in the fixed-income world the way a round number on a scoreboard focuses fans in the fourth quarter. At the August 10 auction, the 6-month bill cleared at a high yield of 3.855%, while the 3-month bill came in at 3.750%. Secondary-market trading told a slightly different story: 3-month bills were changing hands at roughly 3.81%, and 6-month paper was sitting near 3.98%. What the auction numbers actually say The headline yield numbers matter, but the bid-to-cover ratio is where you find out whether anyone actually showed up. Both the 3-month and 6-month auctions saw their ratios increase compared to prior weeks, meaning more dollars chased each dollar of debt on offer. The slight decline in high yields compared to previous auctions fits neatly with that interpretation. When demand outpaces supply, the price of the security rises and the yield falls, even modestly. Both things happened here simultaneously. Treasury bills are zero-coupon securities, meaning the government sells them at a discount and pa...