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U.S. Treasury Auction Yields During Boom, Bust, and Quantitative Easing: Role for Fed and Foreign Purchasers

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Author Info

  • Catherine L. Mann

    ()
    (International Business School, Brandeis University)

  • Oren Klachkin

Abstract

Since 2007, three actors have been particularly important in U.S. Treasury auctions: The U.S. government, issuing $8.4 trillion in U.S. Treasury securities in 2010 alone; foreign official entities, purchasing $398 billion in U.S. Treasury securities in 2010 alone; and finally the Federal Reserve, which intervened in the U.S. Treasury market by purchasing $900 billion U.S. Treasury securities during 2009 and 2010. Using our unique data set of every U.S. Treasury auction from May 2003 to year-end 2011, we find first, that the yield at auction compared to the previous-day’s matched-maturity instrument varies significantly across the maturity of the instrument, as well as the time period of boom and bust. Similarly, the bid-cover ratios are importantly related to the auction yield and to macroeconomic environment. Third, we find that indirect bidders, a proxy for foreign official entities, although not allocated the largest shares at the auctions, were the relatively more important group in determining the auction yield on long-term U.S. Treasury securities. Finally, we find that all of these relationships change significantly when the Federal Reserve entered the Treasury market.

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File URL: http://www.brandeis.edu/departments/economics/RePEc/brd/doc/Brandeis_WP47.pdf
File Function: Revised version, 2012
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Bibliographic Info

Paper provided by Brandeis University, Department of Economics and International Businesss School in its series Working Papers with number 47.

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Length: 23 pages
Date of creation: Nov 2011
Date of revision: May 2012
Handle: RePEc:brd:wpaper:47

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Postal: MS032, P.O. Box 9110, Waltham, MA 02454-9110
Web page: http://www.brandeis.edu/departments/economics/
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Related research

Keywords: Federal Reserve; Quantitative easing; Foreign official; Dutch auction; US Treasury securities;

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  1. Hongjun Yan, 2011. "Anticipated and Repeated Shocks in Liquid Markets," Yale School of Management Working Papers amz2675, Yale School of Management.
  2. Johannes C. Stroebel & John B. Taylor, 2009. "Estimated Impact of the Fed’s Mortgage-Backed Securities Purchase Program," NBER Working Papers 15626, National Bureau of Economic Research, Inc.
  3. Pasquariello, Paolo & Vega, Clara, 2009. "The on-the-run liquidity phenomenon," Journal of Financial Economics, Elsevier, vol. 92(1), pages 1-24, April.
  4. Christopher J. Neely, 2010. "The large scale asset purchases had large international effects," Working Papers 2010-018, Federal Reserve Bank of St. Louis.
  5. Joseph Gagnon & Matthew Raskin & Julie Remache & Brian Sack, 2010. "Large-scale asset purchases by the Federal Reserve: did they work?," Staff Reports 441, Federal Reserve Bank of New York.
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