what is a bill auction 
a bill auction is a public auction held weekly by the u s treasury of federal debt obligations specifically treasury bills t bills whose maturies range from one month to one year 1 as of may 2021 there are 24 authorized primary dealers who are required to participate in the auction and bid directly upon each issue 2 a bill auction is the official manner in which all u s treasury bills are issued understanding a bill auctionthe weekly bill auction is actually an electronic dutch auction in this sort of proceeding investors place a bid for the amount of the offering they are willing to buy in terms of quantity and price the best bid wins of course but the offering s price is set after all the bids are taken in and sorted as opposed to it rising sequentially as bidders consecutively counter each other to kickstart the process an announcement is released several days before the auction is to occur the announcement includes information such as the auction date issue date amount of securities that will be sold bidding close times participation eligibility etc 1 bids are accepted up to 30 days in advance 4once it begins the bill auction accepts competitive bids to determine the discount rate to be paid on each issue a group of securities dealers banks and brokerages known as primary dealers are authorized and obligated to submit competitive bids on a pro rata share of every treasury bill auction 2 the winning bid on each issue will determine the interest rate that is paid on that issue once an issue is purchased the dealers are allowed to hold sell or trade the bills the demand for t bills at auction is determined by market and economic conditions all bill auctions are open to the public through treasury direct or the treasury automated auction processing system taaps who participates in a bill auction participants in any treasury auction consist of retail investors and institutional investors who submit bids categorized as either competitive or non competitive tenders non competitive tenders are submitted by smaller investors in effect these investors are bidding a bit blind while they are guaranteed to receive bills they won t know the exact final price or what discount rate they will receive until the auction closes an investor who submits a non competitive bid agrees to accept the final discount rate which is determined by the competitive side of the auction 3competitive tenders are submitted by bigger investors such as institutional investors each bidder is limited to 35 of the amount of the offering per bill auction 5 each bid submitted specifies the lowest rate or discount margin that the investor is willing to accept for the debt securities the bids with the lowest discount rate will be accepted first the lowest discount rate that meets the supply of debt being sold serves as the winning yield or the highest accepted yield after all non competitive bids have been subtracted from the total amount of securities offered 3unlike the non competitive bidders competitive bidders are not guaranteed to receive any t bills as approval of their bid depends on the discount yield that they offered to accept if their offered price is too low they may end up getting locked out of the offering all investors competitive and non competitive who bid at or above the level of the winning yield receive securities with this discount rate 3the non competitive bid closing time for bills is normally 11 00 a m eastern time on auction day the competitive bid closing time for bills is normally 11 30 a m eastern time on auction day 5