Bill Auction: Definition, How It Works & How to Participate

A bill auction is a public sale of short-term government debt. The U.S. Treasury Department conducts Treasury bill auctions every week to raise money to fund the government's operations.

The Treasury sells bills in denominations of $100, $500, $1,000, $5,000, and $10,000. The minimum purchase is $100.

The Treasury sets a price for each bill auction. The price is the yield, or interest rate, that the government will pay to investors. The yield is determined by the auction process.

In a bill auction, the Treasury receives bids from investors. The bids are for the amount of money that the investor is willing to pay for the bills. The bids are also for the yield that the investor is willing to accept.

The Treasury accepts the bids that are the highest yields. The Treasury then sells the bills to the investors who submitted the winning bids.

The Treasury bill auction is a competitive process. The investors who submit the highest bids will get the bills. The investors who submit the lowest bids will not get the bills.

The Treasury bill auction is a good way for investors to get short-term government debt. Bills are a safe investment because they are backed by the full faith and credit of the U.S. government. Bills also pay a higher interest rate than Treasury bonds.

To participate in a bill auction, you must have an account with a broker or dealer that is authorized to participate in Treasury auctions. You can also participate in Treasury auctions directly through the Treasury Department's website.