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Minyan Mailbag - Bid to Cover



Note: Our goal in Minyanville is to remove intimidation from the financial markets and encourage an interactive dialogue among the Minyanship. We share this next discussion with that very intent.


In the spirit of the educational mission set forth in the 'Ville, I have 2 questions for you or the other professors:

1) Could you please explain the bid to cover ratio figure in government bond auctions and their potential significance. Also, do these ratios tend to vary between maturities and classes?

2) Could you please explain the potential significance of the number of days to cover in short interest.

I would like to use these figures in my overall outlook for the market but don't completely understand them as I have no historical reference or familiarity to fall back on for comparitive purposes. In addition, has anyone ever crunched the numbers to come up with (quasi) empirical evidence that might demonstrate correlations with stock market movements (in either direction) over various time periods?

Thanks kindly and as always, keep up the great work!
Minyan JD

Minyan JD,

Bid/cover ratios are a measure of how many bids there are relative to the amount of debt being auctioned. They vary by maturity and are only an indication of demand at the very moment of the auction. Further, they can be influenced not only by the level of rates, but by the price action in advance of an auction. While they can influence trading right after an auction, they do not necessarily indicate longer-term trends.



No positions in stocks mentioned.

Todd Harrison is the founder and Chief Executive Officer of Minyanville. Prior to his current role, Mr. Harrison was President and head trader at a $400 million dollar New York-based hedge fund. Todd welcomes your comments and/or feedback at

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