Anomalous Bidding In Short-Term Treasury Bill Auctions
AbstractWe show that Treasury bill auction procedures create classes of price-equivalent discount rates for bills with less than 72 days to maturity. We argue that it is inefficient for market participants to bid at a discount rate that is not the minimum rate in its class. The inefficiency of bidding at other than the minimum rate is related to a quantity shortfall rather than an unexploited profit opportunity. Auction results for weekly offerings of four-week bills and occasional offerings of cash management bills show that market participants frequently bid at inefficient rates. However, they are more likely to bid at efficient rates than chance would suggest. 2005 The Southern Finance Association and the Southwestern Finance Association.
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Bibliographic InfoArticle provided by Southern Finance Association & Southwestern Finance Association in its journal Journal of Financial Research.
Volume (Year): 28 (2005)
Issue (Month): 2 ()
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Other versions of this item:
- Michael J. Fleming & Kenneth D. Garbade & Frank Keane, 2004. "Anomalous bidding in short-term Treasury bill auctions," Staff Reports 184, Federal Reserve Bank of New York.
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- Jegadeesh, Narasimhan, 1993. " Treasury Auction Bids and the Salomon Squeeze," Journal of Finance, American Finance Association, vol. 48(4), pages 1403-19, September.
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- Cammack, Elizabeth B, 1991. "Evidence on Bidding Strategies and the Information in Treasury Bill Auctions," Journal of Political Economy, University of Chicago Press, vol. 99(1), pages 100-130, February.
- Michael J. Fleming & Kenneth D. Garbade, 2002. "When the back office moved to the front burner: settlement fails in the treasury market after 9/11," Economic Policy Review, Federal Reserve Bank of New York, issue Nov, pages 35-57.
- David Goldreich, 2004. "Behavioral Biases of Dealers in U.S. Treasury Auctions," Working Papers 2004.143, Fondazione Eni Enrico Mattei.
- Fleming, Michael J. & Garbade, Kenneth D., 2007. "Dealer behavior in the specials market for US Treasury securities," Journal of Financial Intermediation, Elsevier, vol. 16(2), pages 204-228, April.
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