Typically,             there exist two types of bids in the treasury auction process. They             are: Competitive bid and non-competitive bid.
A             non-competitive bid is a bid an entity submits and which is willing             to purchase the auctioned security at the pre-determined yield by             the auction process. Normally, individual investors, who are mostly             smaller institutional investors, submit a non-competitive bid for             purchase of treasury securities. In such case, the bidder submits             only the desired quantity but not the yield at which he is willing             to purchase the auctioned security. This desired quantity should not             exceed $1 million for treasury bills and $ 5 million for treasury             coupon securities.
On             the contrary, competitive bid is a bid submitted by the bidder in             which he specifies the quantity desired and the yield at which he is             willing to purchase the auctioned security. Normally, these are the             bids the brokers/dealers, depository institutions, and some of the             larger money management firms submit.
The             auction results are declared after deducting the total             non-competitive tenders and non-public purchases from the total             securities auctioned. Non-public purchases mean the purchases made             by the Federal Reserve itself. The remaining amount after such             deduction is meant for distribution among the competitive bidders.
Subsequently,             the bids are arranged from the lowest yield bid to the highest yield             bid, i.e., the bids are arranged from the highest price to the             lowest price. Until the amount to be distributed to the competitive             bidders is completely allocated, all competitive bids (starting form             the lowest yield bid) are accepted. Further, the highest yield the             treasury accepts is referred to as stop yield and bidders at that             yield are awarded a percentage from their total tender offer.
In             US, all treasury auctions are single-price auctions. In it, all             bidders are awarded securities at the stop yield i.e., the highest             yield of accepted competitive tenders. This type of auction is             termed as 'Dutch auction'.