Bid-to-Cover Ratio

When your wife hogs the blankets. Oh, wait. That's bed-to-cover ratio.

It's a way to measure demand for a security that is being sold via an auction. The figure consists of the currency value of bids received compared to the currency value of the amount of securities available. It can theoretically be used in almost any context, though it is used regularly with sale of Treasury bonds.

The U.S. government regularly runs auctions for newly issued Treasury bonds. Among the auction statistics released along with the auction results (which provide information on things like duration and yield), the government reveals the bid-to-cover ratio for that particular auction. This provides the market with a signal of Treasury demand, which can, in turn, affect bond trading.

Say the government is selling $10 billion worth of 10-year notes. It received $25 billion in bids, meaning that people have put in orders to buy $25 billion worth of the offering. The bid-to-cover ratio would be 2.5 for that particular auction.