The Canadian Treasury Bill Auction and the Term Structure of Interest Rates
AbstractThis paper examines the efficiency of the Canadian treasury bill market as measured by the performance of the expectations model of the term structure of interest rates. In particular, market efficiency is shown to depend upon certain institutional features of the treasury bill auction process. Building on past work by Campbell and Galbraith (1997), the paper establishes links between rejections of efficiency and high absolute values of the spread between six and three month interest rates. The major contribution of the paper is to then show that a link exists between weeks in which spreads are large and weeks in which accepted auction yields show a large degree of dispersion. The paper discusses the implications of these findings for the term structure literature and for the reform of auction precedures currently in progress at the Bank of Canada and Department of Finance. Ce papier examine l'efficacité du marché des bons du trésor canadiens tel que mesurée par la performance du modèle de la structure par terme des taux d'intérêt. En particulier, l'efficacité du marché dépend de certaines caractéristiques institutionnelles du processus d'adjudication des bons du trésor. Se basant sur les travaux de Campbell et Galbraith (1997), le papier etablit des liens entre les rejets d'efficacité et les écarts élevés, en termes absolus, des rendements des titres à trois et six mois. La principale contribution du papier est alors de montrer qu'il y a un lien entre les semaines où ces écarts sont importants et les semaines où les rendements des offres acceptées à l'enchère sont fortement dispersées. Le papier discute les implications de ceci pour la littérature sur la structure par terme des taux d'intérêt et pour la réforme des procédures d'enchère actuellement en cours à la Banque du Canada et au Départment des Finances.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by CREFE, Université du Québec à Montréal in its series Cahiers de recherche CREFE / CREFE Working Papers with number 75.
Length: 25 pages
Date of creation: Apr 1999
Date of revision:
Contact details of provider:
Postal: P.O. Box 8888, Downtown Station, Montreal (Canada) Quebec, H3C 3P8
Phone: (514) 987-6181
Fax: (514) 987-8494
Web page: http://ideas.uqam.ca/CREFE/
More information through EDIRC
Term structure of interest rates; financial markets; central banks;
Other versions of this item:
- Godbout, Lise & Storer, Paul & Zimmermann, Christian, 2002. "The Canadian treasury bill auction and the term structure of interest rates," Journal of Banking & Finance, Elsevier, vol. 26(6), pages 1165-1179, June.
- E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
- G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
This paper has been announced in the following NEP Reports:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- N. Gregory Mankiw & Lawrence H. Summers, 1984.
"Do Long-Term Interest Rates Overreact to Short-Term Interest Rates?,"
Brookings Papers on Economic Activity,
Economic Studies Program, The Brookings Institution, vol. 15(1), pages 223-248.
- N. Gregory Mankiw & Lawrence H. Summers, 1987. "Do Long-Term Interest Rates Overreact to Short-Term Interest Rates?," NBER Working Papers 1345, National Bureau of Economic Research, Inc.
- Shiller, Robert J, 1979. "The Volatility of Long-Term Interest Rates and Expectations Models of the Term Structure," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1190-1219, December.
- Robert J. Shiller & John Y. Campbell & Kermit L. Schoenholtz, 1983.
"Forward Rates and Future Policy: Interpreting the Term Structure of Interest Rates,"
Cowles Foundation Discussion Papers
667, Cowles Foundation for Research in Economics, Yale University.
- Robert J. Shiller & John Y. Campbell & Kermit L. Schoenholtz, 1983. "Forward Rates and Future Policy: Interpreting the Term Structure of Interest Rates," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 14(1), pages 173-224.
- Campbell, Bryan & Galbraith, John W, 1993. "Inference in Expectations Models of the Term Structure: A Non-parametric Approach," Empirical Economics, Springer, vol. 18(4), pages 623-38.
- Blinder, Alan S, 1997. "Is There a Core of Practical Macroeconomics That We Should All Believe?," American Economic Review, American Economic Association, vol. 87(2), pages 240-43, May.
- N. Gregory Mankiw & Jeffrey A. Miron, 1986.
"The Changing Behavior of the Term Structure of Interest Rates,"
NBER Working Papers
1669, National Bureau of Economic Research, Inc.
- Mankiw, N Gregory & Miron, Jeffrey A, 1986. "The Changing Behavior of the Term Structure of Interest Rates," The Quarterly Journal of Economics, MIT Press, vol. 101(2), pages 211-28, May.
- Campbell, Bryan & Galbraith, John W, 1997. "Non-parametric Regression Models of Deviations from Orthogonality in the Expectations Theory of the Term Structure," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 59(2), pages 265-84, May.
- Fama, Eugene F., 1984. "The information in the term structure," Journal of Financial Economics, Elsevier, vol. 13(4), pages 509-528, December.
- Walid Hejazi & Huiwen Lai & Xian Yang, 2000. "The expectations hypothesis, term premia, and the Canadian term structure of interest rates," Canadian Journal of Economics, Canadian Economics Association, vol. 33(1), pages 133-148, February.
- Aman Ullah, 1988. "Non-parametric Estimation of Econometric Functionals," Canadian Journal of Economics, Canadian Economics Association, vol. 21(3), pages 625-58, August.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Stéphane Pallage).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.