Non-Competitive Tender

A non-competitive tender is an offer by a non-institutional (retail) investor to purchase U.S. Treasury securities without specifying the price. Instead of bidding in the competitive auction that sets yield and price, non-competitive bidders accept the market yield determined by the competitive bidding process of large institutional buyers.

Key takeaways

• Non-competitive tenders let small investors buy Treasury securities without submitting a price bid.
• The price/yield is set indirectly by competitive tenders from institutional buyers through a Dutch auction.
• Purchase limits for non-competitive tenders are typically $10,000 minimum and $500,000 maximum.
• Non-competitive tenders can be submitted via platforms such as TreasuryDirect, avoiding brokerage fees.

How the auction works

1. The Treasury conducts auctions where institutional bidders (primary dealers, foreign governments, large investors) submit competitive bids specifying yields and amounts.
2. The Treasury accepts the lowest-yield (cheapest) bids first, moving up yields until it raises the required amount.
3. The highest yield accepted—the stop-out yield—becomes the yield applied to all accepted competitive bids and to any non-competitive tenders.
4. Non-competitive bidders receive the securities at that stop-out yield without having participated directly in setting it.

Advantages for small investors

• Simplicity: No need to determine an appropriate bid price or yield.
• Fair pricing: The rate is set by actual market demand from institutional participants.
• Low cost: Buying through government platforms can avoid brokerage commissions.
• Accessible size: Reasonable minimum investment ($10,000) and a clear maximum ($500,000).

Example

Imagine the Treasury accepts competitive bids up to a stop-out yield of 0.30%. An institutional bidder who would have accepted 0.10% still receives securities at 0.30%. All non-competitive tenders submitted for that auction also receive the securities at 0.30%, regardless of an individual non-competitive bidder’s willingness to accept a lower yield.

Participating

Retail investors typically submit non-competitive tenders through TreasuryDirect or approved brokers. The tender must be between the minimum and maximum permitted amounts and does not include a price or yield—those are determined by the auction.

Bottom line

Non-competitive tenders provide a straightforward way for small investors to buy Treasury securities at market-determined yields without competing directly against large institutional bidders, often with lower costs and predictable execution.