DEFINITION of 'BidtoCover Ratio'
A ratio that compares the number of bids received in a Treasury security auction to the number of bids accepted. The bidtocover ratio is an indicator of the strength or demand for a Treasury offering relative to investor bids deemed suitable in the auction process. A higher ratio would be an indication of a strong or "bought" auction.
INVESTOPEDIA EXPLAINS 'BidtoCover Ratio'
For example, a ratio above 2.0 indicates a successful auction comprised of aggressive bids. On the other hand, a low ratio is an indication of a disappointing auction, marked by a wide bidask spread. In such a scenario, investor demand for Treasury securities at anticipated rates is below expectation, which could lead to an underbought issue if the ratio falls below 1.0.
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