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The institutionalization of treasury note and bond auctions, 1970-75

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  • Kenneth D. Garbade

Abstract

The substitution of auctions for fixed-price offerings was expected to lower the U.S. Treasury's cost of financing the federal debt. Despite this and other potential benefits, the Treasury failed in both 1935 and 1963 in its attempts to introduce regular auction sales of coupon-bearing securities. This article examines the Treasury's third and successful attempt between 1970 and 1975. The author identifies three likely reasons why the Treasury succeeded in the early 1970s: it closely imitated its successful and well-understood bill auction process, it extended the maturity of auction offerings gradually, and it was willing to modify the auction process when shortcomings became apparent.

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Bibliographic Info

Article provided by Federal Reserve Bank of New York in its journal Economic Policy Review.

Volume (Year): (2004)
Issue (Month): May ()
Pages: 29-45

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Handle: RePEc:fip:fednep:y:2004:i:may:p:29-45:n:v.10no.1

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Related research

Keywords: Auctions ; Treasury notes ; Treasury bonds ; Debts; Public;

References

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  1. Henry Goldstein, 1962. "The Friedman Proposal for Auctioning Treasury Bills," Journal of Political Economy, University of Chicago Press, vol. 70, pages 386.
  2. Stephen G. Cecchetti, 1989. "The Case of the Negative Nominal Interest Rates: New Estimates of the Term Structure of Interest Rates During the Great Depression," NBER Working Papers 2472, National Bureau of Economic Research, Inc.
  3. Goldstein, Henry N & Kaufman, George G, 1975. "Treasury Bill Auction Procedures: An Empirical Investigation: Comment," Journal of Finance, American Finance Association, vol. 30(3), pages 895-99, June.
  4. Boatler, Robert W, 1975. "Treasury Bill Auction Procedures: An Empirical Investigation: Comment," Journal of Finance, American Finance Association, vol. 30(3), pages 893-94, June.
  5. Bolten, Steven, 1973. "Treasury Bill Auction Procedures: An Empirical Investigation," Journal of Finance, American Finance Association, vol. 28(3), pages 577-85, June.
  6. V.V. Chari & Robert J. Weber, 1992. "How the U.S. Treasury should auction its debt," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall, pages 3-12.
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Cited by:
  1. Hughes, Michael P. & Smith, Stanley D. & Winters, Drew B., 2008. "The effect of auctions on daily treasury-bill volatility," The Quarterly Review of Economics and Finance, Elsevier, vol. 48(1), pages 48-60, February.

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