Blind Bid

  

When an investor invests in they-don’t-know-what-securities.

Yes, blind bids can be as risky as they sound (for individuals), but they don’t have to be (for companies). Usually, institutional investors (think: mutual funds, banks, hedge funds, and other financial institutions) are the ones using blind bids, spending hundreds of millions of dollars.

While they don’t know exactly what they’re buying, typically they do know the general characteristics of the chunk of securities they’re investing in. Like...if it’s mostly safe bonds or mostly growth stocks.

While savvy individual investors would never do such a thing, it’s commonplace among large institutional investors, who still have a pretty good idea of what they’re getting themselves into.

Related or Semi-related Video

Finance: What is the Bid-to-Cover Ratio?11 Views

00:00

Finance allah shmoop what is the bid to cover ratio

00:07

doesn't have to do with how much of the blanket

00:10

your loved one leaves you at night No that's bed

00:14

to cover ratio Totally different We're talking about a sentiment

00:17

index as it relates to us treasury bill auctions and

00:21

the overall health of the u s economy As you

00:25

hopefully remember us treasury securities air sold at a discount

00:29

to par pay no interest along the way and then

00:32

just pay full par at the end That is a

00:35

bid for a six month t bill might be a

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nine hundred eighty eight dollars and twenty cents for a

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piece of paper paying a thousand bucks in six months

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We'll have the government come up with that nine hundred

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eighty eight twenty number Was it from an act of

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congress a mandate from the prez of bill no it

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was set by bids from investors hoping to be ableto

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buy that grand payable in six months for as cheap

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a price as possible But once that bid number is

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set well then the government decides it wants to sell

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me x dollars worth of that particular security and the

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price is set The government hopes that there are buyers

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or bitters for that security paying some in two ish

01:16

percent and change an annualized returns Well if there are

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tons of bidders at two percent it signals to the

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government that next week well it can probably offer just

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one point eight percent for that same paper all else

01:29

being equal and you know then they can raise as

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much money as they want at that point Well if

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there are scant few bidders well then it signals to

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the g men that they might have to raise the

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rent they pay on the money they're willing to borrow

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here A two point once before do two point three

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percent or something like that So the bid teo cover

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ratio is the number of bids made divided by the

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number of bids accepted or covered and it's a carefully

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tracked number because it conveys a lot of market intelligence

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about investor demand for us paper and you know generally

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how healthy things are So to recap bid to cover

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ratio bed to cover ratio on this would be a 00:02:08.09 --> [endTime] bed couch ratio

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