Indirect Bidder

AAA

DEFINITION of 'Indirect Bidder'

An entity that purchases Treasury securities at auction through an intermediary, such as a dealer or bank. Indirect bidders include financial institutions, such as foreign central banks, but can also include domestic money managers making bids through primary dealers.

INVESTOPEDIA EXPLAINS 'Indirect Bidder'

The Treasury Department permits indirect bidding on a competitive and a noncompetitive basis. Competitive bids require the direct bidder to specify the desired return, with the dollar amount of securities won at auction depending on the highest competitive discount rate. A noncompetitive bid does not require the bidder to indicate a desired return. The Treasury accepts all noncompetitive bids, and then competitive bids, in order of increasing yield.

After an auction has ended, the Treasury Department announces the dollar amount of securities purchased by primary dealers and other direct bidders, as well as by indirect bidders.

Treasury note purchases by indirect bidders are used as a proxy for investments made by foreign investors. They help the Treasury Department gauge the willingness of foreign banks to continue purchasing Treasury securities. Foreign entities make up a significant portion of the owners of outstanding Treasury securities, so the willingness of these organizations to continue buying securities has a major impact on the ability of the Treasury to raise funds. 

RELATED TERMS
  1. Treasury Direct

    The online market where investors can purchase federal government ...
  2. Central Bank

    The entity responsible for overseeing the monetary system for ...
  3. 30-Year Treasury

    A U.S. Treasury debt obligation that has a maturity of 30 years. ...
  4. Treasury Note

    A marketable U.S. government debt security with a fixed interest ...
  5. 10-Year Treasury Note

    A debt obligation issued by the United States government that ...
  6. U.S. Treasury

    Created in 1798, the United States Department of the Treasury ...
Related Articles
  1. Bonds & Fixed Income

    The Treasury And The Federal Reserve

    Find out how these two agencies create policies to stimulate the economy in tough economic times.
  2. Bonds & Fixed Income

    Introduction to Treasury Securities

    Purchasing bonds that are backed by the full faith and credit of the U.S. government can provide steady guaranteed income and peace of mind. Knowing the characteristics of each type of treasury ...
  3. Investing

    Treasury Bills

    Learn more about this government debt obligation and how it can fit into your portfolio.
  4. Personal Finance

    What Are Central Banks?

    They print money, they control inflation, and much, much more. All you need to know about central banks is here.
  5. Credit & Loans

    Treasury International Capital

    This important economic indicator can affect interest rates, dollar value and the bond markets.
  6. Bonds & Fixed Income

    What is the lowest capitalization rate before an investment becomes unprofitable?

    Learn about different levels of profitability associated with investments featuring similar capitalization rates. Explore how value changes affect rates.
  7. Economics

    What is the difference between fiscal policy and monetary policy?

    Utilizing founding principles of macroeconomics through both fiscal and monetary policy can have drastic effects on a country's economic state.
  8. Bonds & Fixed Income

    What are the benefits and drawbacks of owning preferred stock and common stock?

    Owning a share of a company can be accomplished through the purchase of common or preferred stock, but there are benefits and drawbacks for each option.
  9. Investing

    Reassessing Your Approach To Bond Investing

    Rethinking your fixed-income portfolio may not resonate in quite the same way as dropping 10 pounds or finally giving up that smoking habit.
  10. Bonds & Fixed Income

    How Diaspora Bonds Work

    Developing and emerging nations with sizable populations living overseas are using diaspora bonds to raise financing from emigrants.

You May Also Like

Hot Definitions
  1. Treasury Bond - T-Bond

    A marketable, fixed-interest U.S. government debt security with a maturity of more than 10 years. Treasury bonds make interest ...
  2. Weight Of Ice, Snow Or Sleet Insurance

    Financial protection against damage caused to property by winter weather specifically, damage caused if a roof caves in because ...
  3. Weather Insurance

    A type of protection against a financial loss that may be incurred because of rain, snow, storms, wind, fog, undesirable ...
  4. Portfolio Turnover

    A measure of how frequently assets within a fund are bought and sold by the managers. Portfolio turnover is calculated by ...
  5. Commercial Paper

    An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories ...
  6. Federal Funds Rate

    The interest rate at which a depository institution lends funds maintained at the Federal Reserve to another depository institution ...
Trading Center