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U.S. Treasury Auction Yields Before and During Quantitative Easing: Market Factors vs.Auction Specific Factors

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  • Catherine L. Mann

    ()
    (International Business School, Brandeis University)

  • Oren Klachkin

    ()
    (International Business School, Brandeis University)

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    Abstract

    We construct a dataset for every U.S. Treasury auction from 2003 to 2012. We find that market factors known before the auction -- FedFunds rate, S&P, VIX -- are all significant for the auction high-yield, but the relationships differ before vs. during QE and between Bond and Bills auctions. Auction-specific innovations matter for the auction high-yield. Bills auctions have a forecastable component based on information from the previous auction of that maturity. Bidder types may differ systematically. Indirect bidders in the Bond auctions may bid relatively ‘low’ compared to the average bid and Primary Dealers may bid ‘high’. These relationships differ before vs. during QE. These results suggest that quantitative easing implemented in the secondary market has affected the auction market for U.S. Treasury securities.

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    File URL: http://www.brandeis.edu/departments/economics/RePEc/brd/doc/Brandeis_WP67.pdf
    File Function: First version, 2014
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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 67.

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    Length: 20 pages
    Date of creation: Jan 2014
    Date of revision:
    Handle: RePEc:brd:wpaper:67

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    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. Jegadeesh, Narasimhan, 1993. " Treasury Auction Bids and the Salomon Squeeze," Journal of Finance, American Finance Association, vol. 48(4), pages 1403-19, September.
    2. Glenn D. Rudebusch & Eric T. Swanson & Tao Wu, 2006. "The bond yield "conundrum" from a macro-finance perspective," Working Paper Series 2006-16, Federal Reserve Bank of San Francisco.
    3. 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.
    4. Pasquariello, Paolo & Vega, Clara, 2009. "The on-the-run liquidity phenomenon," Journal of Financial Economics, Elsevier, vol. 92(1), pages 1-24, April.
    5. Taeyoung Doh, 2010. "The efficacy of large-scale asset purchases at the zero lower bound," Economic Review, Federal Reserve Bank of Kansas City, issue Q II, pages 5-34.
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