What is a Bid-to-Cover Ratio?
An investment term that is often associated with a treasury auction, the bid-to-cover ratio involves the number of bids that are accepted for the auction divided into the number of bids that were properly submitted in relation to the auction. The calculation of the bid-to-cover ratio is understood to be an accurate means of determining the level of demand for the auction. The ratio is considered to be an accurate gauge of the current level of desirability for the issue involved in the auction. A high bid-to-cover ratio indicates that the level of investor desire for the issue is very high, and that there is every chance that another similar auction would result in excellent returns. By contrast, a bid-to-cover ratio that is somewhat low is a strong indicator that current market conditions have limited the enthusiasm for the issue, and that engaging in a similar auction in the short term is probably not advisable. Because the bid-to-cover ratio is held in such high regard by so many inv
