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Auctions of Public Debt Securities by the Central Bank of Brazil: A Study of the Factors of the Dispersion of Proposals for BBCs

Author

Listed:
  • Márcio G. P. Garcia
  • Leonardo B. Rezende

Abstract

We aim at obtaining a simple econometric model that allows us to build a confidenceinterval for the dispersion of the bids made by financial institutions at the central bankweekly auctions of short-term securities in Brazil. Under competitive conditions (e. g., no coalitionbetween a few financial institutions) we assume that the bids’ dispersion is associatedwith the volatility of the daily interest rate futures prices and the daily interest rates that had prevailed during the days prior to the auction. Based on that assumption, our model succeedsin separating the two auctions with extremely high volatility. ln one of them, the highdispersion could be predicted using the other interest rate markets’ data; in the other the dispersionfell outside the confidence interval for the predicted dispersion. This can be used asempirical evidence of an attempt to comer the market that has indeed occurred at that date. JEL Classification: H63; E58.

Suggested Citation

  • Márcio G. P. Garcia & Leonardo B. Rezende, 2000. "Auctions of Public Debt Securities by the Central Bank of Brazil: A Study of the Factors of the Dispersion of Proposals for BBCs," Brazilian Journal of Political Economy, Center of Political Economy, vol. 20(4), pages 369-386.
    • Handle: RePEc:ekm:repojs:v:20:y:2000:i:4:p:369-386:id:1034
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    Keywords

    Public debt; public debt structure;

    JEL classification:

    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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