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Each auction has a certain $ amount that it can sell. There are competitors and non-competitors in participating in the auction. The competitors states his desired interest rate and if it is lower than the auction rate it will be accepted. The non-competitors accepts the T-bill's current rate. The market grants as many winning bids as it can while still appeasing the non-competitors. The price becomes the lowest winning bid.

Example:

The auction has $10,000,000 available for sale. The bills are $10,000

Competitors Quantity Buying Price

A 3,500,000 9,500

B 3,500,000 9,450

C 3,500,000 9,400

Non-Competitors Quantity

D 1,000,000

E 1,000,000

The market grants A and B their quantity leaving $3,000,000. $2,000,000 goes to D and E leaving $1,000,000 for C. The price becomes $9,400 (Lowest bid price)

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