# Bid-to-Cover Ratio

Bid-to-Cover Ratio

Bid-To-Cover Ratio is a ratio used to express the demand for a particular security during offerings and auctions. In general, it is used for shares, bonds, and other securities. It is computed in two ways: the number of bids received divided by the number of bids accepted, or the total amount of the bids is used instead.

The higher the ratio, the higher the demand. A ratio above 2.0 indicates a successful auction comprised of aggressive bids. A low ratio is an indication of a disappointing auction, marked by a wide bid-ask spread.

For example, suppose debt managers are seeking to raise \$10 billion in ten-year notes with a 5.125% coupon, and in aggregate the bids are as follows:

*\$1.00 billion at 5.115%
*\$2.50 billion at 5.120%
*\$3.50 billion at 5.125%
*\$4.50 billion at 5.130%
*\$3.75 billion at 5.135%
*\$2.75 billion at 5.140%
*\$1.50 billion at 5.145%

The total of all bids is \$19.5 billion and the number of bids accepted would be \$10 billion, therefore leading to a bid-to-cover ratio of 1.95.

ee also

*Dutch auction
*Overallotment option

Notes

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