Bid-to-Cover Ratio

The bid-to-cover ratio is a measure used in the auction of government securities, such as Treasury bonds, to assess the demand for the securities being auctioned. It is calculated by dividing the total amount of bids received by the amount of securities offered for sale. A high bid-to-cover ratio indicates strong demand, as there are more bids than the amount available, suggesting that investors are eager to buy the securities. Conversely, a low bid-to-cover ratio may indicate weak demand.

Example

In a Treasury bond auction where $10 billion worth of bonds are offered and $25 billion in bids are received, the bid-to-cover ratio would be 2.5, indicating high demand.