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.
Related or Semi-related Video
Finance: What is Spread?48 Views
finance a la shmoop. what is spread? before we start just no. get your mind
out of the gutter. spread refers to the money value between [100 dollar bill]
a bid and ask price under a market maker structure of trading securities. no more
wire hangers, a plastic hanger company is publicly traded on an exchange like
Nasdaq where buyers bid for a price to purchase and sellers ask for a price to [Nasdaq wall shown]
trade. no more wire hangers is bid this moment at 37:23 a share by buyers
willing to buy right now at that price and is being asked at this moment at a
price of 37.31. note the eight cents a shared difference in the share prices.
that dif is the spread between the two prices, and it's worth noting that in [bread is buttered]
extremely volatile stocks, the spread widens. and in boring highly liquid
stocks which don't move much, the spread tightens or is narrower. that is on a
volatile equivalent of no more wire hangers the spread might grow to 20 or
30 cents a share whereas a boring name that pays a big dividend and the stock
never moves much we're thinking AT&T here, [man snores at a desk]
well that spread might be just three or four cents. so why grow? well because a
market maker in a volatile stock doesn't want to be caught losing money on her
inventory. if no more wire hangers suddenly gapped down to 37.10 a share [equation shown]
well it would be likely less than the average of what the market maker paid
for her quote "inventory" unquote in that stock from which he was making a market
in it. each time the shares trade the market makers dip into that spread to [woman dips cracker in butter]
pay their bills and allow them to keep doing business. so that's spread. and it's
not the type that Prince used to sing about. [man on stage]
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