How a US Treasury auction works

Drafted with AI assistance from official sources; checked against the sources listed below.

The US Treasury borrows by selling securities at public auctions, more than 400 of them a year. In 2025 it held 444 auctions, 336 of them for bills. Bidders name the yield they will accept; the Treasury fills the amount it set out to borrow from the lowest yields upward, and everyone who wins pays the same yield.

What gets auctioned

Treasury issues five kinds of marketable security, each in a fixed set of terms:

• Bills from 4 weeks to 52 weeks. They pay no coupon; they are issued below face value and pay face value at maturity.
• Notes of 2, 3, 5, 7 and 10 years and bonds of 20 and 30 years. They pay a fixed coupon every six months.
• TIPS, whose principal moves with consumer prices.
• Floating rate notes, whose interest resets every week.

The differences, including why bills are quoted as a discount, are in Bills, notes, bonds, TIPS and FRNs: the differences.

Step 1: the announcement

A few days before each auction, Treasury publishes an auction announcement. It states the amount on offer, the auction date, the issue date, the closing times for bids and the security's terms. Treasury also publishes a tentative calendar months ahead, and four times a year, usually on the first Wednesday of February, May, August and November, it gives the quarterly refunding press conference where it sets out its borrowing plans for the quarter.

Some auctions add to a security that already exists instead of creating a new one. That is a reopening: same maturity date, same coupon, same identifier.

Step 2: the bids

Auctions are open to the public. There are two kinds of bid.

• A noncompetitive bid asks for an amount, up to $10 million per auction, and agrees to take whatever yield the auction sets. Individuals using TreasuryDirect or a bank bid this way.
• A competitive bid names the lowest yield the bidder will accept (a discount rate for bills, a discount margin for floating rate notes). One bidder can win at most 35% of the amount on offer, less any position it already has in the security.

Bids must arrive before the closing times printed in the announcement. Noncompetitive bids close first. For most bill auctions competitive bids close at 11:30 a.m. Eastern time, and for notes and bonds at 1:00 p.m. Eastern time; the announcement is the authority for each auction.

Among competitive bidders, Treasury's results separate three groups: primary dealers, direct bidders and indirect bidders. What their shares can and cannot tell you is in How to read a Treasury auction result.

Step 3: setting the yield

When bidding closes, Treasury works through the bids in a fixed order (31 CFR 356.20):

1. All noncompetitive bids are accepted in full.
2. Competitive bids are accepted from the lowest yield upward until the amount on offer is filled.
3. The yield of the last bid needed is the high yield. Bids at exactly that yield get a share of what is left, a percentage the results call "allotted at high".
4. Every successful bidder, competitive or not, gets the high yield. This is a single-price auction.

For a new note or bond, Treasury then sets the coupon. It picks the rate, in eighths of a percentage point, that gives a price closest to, but not above, 100 at the high yield. That is why a new note's coupon is usually a little below its high yield and its price a little below face value. The coupon is never set below 1/8 of 1%.

Step 4: the results

Treasury publishes the results minutes after bidding closes. The results file gives the amount bid for (tendered), the amount accepted, the high, median and low yields, the bid-to-cover ratio and the amounts awarded to each bidder group.

The Federal Reserve often appears in the results too. When securities it owns are maturing, it rolls them into the new issue. Those amounts are a SOMA add-on: they come on top of the amount on offer, they are awarded at the high yield, and they are left out of the bid-to-cover ratio.

Step 5: settlement

The new securities are issued on the issue date, a few days to a few weeks after the auction. Winning bidders pay, and Treasury uses the cash to pay off securities that mature that day and to fund the government. How much matures each month is on the maturity calendar.

A worked example: the 7-year note of 24 September 2026

Source: U.S. Treasury, auction results for the 7-year note of 24 September 2026, checked 2 October 2026.

Bidders asked for about 2.42 times the $44 billion on offer, roughly $106 billion (our arithmetic: 2.42 times 44). Treasury accepted $44 billion of it at yields up to 5.085%, and every winner got 5.085%. The Federal Reserve's $6.624 billion came on top and did not count toward the ratio. The full result, and how it compares with every earlier 7-year note auction, is on its auction page.

What this guide cannot tell you

• How a result compares with history. That depends on the term: a bid-to-cover ratio that is ordinary for a 13-week bill is high for a 30-year bond. Each term page gives the comparison with its window.
• The tail, the gap between the high yield and the market yield just before the deadline. It needs licensed market quotes, so 500metrics does not publish it.
• Any decision about a Treasury security. 500metrics publishes the figures, not advice.