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The Demand for Treasury Securities at Auction

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  • Bahamin, Payam
  • Cebula, Richard
  • Foley, Maggie
  • Houmes, Robert

Abstract

This study empirically analyzes the demand for Treasury securities at auctions over the period October 1998 through July 2010 from the perspective of bid composition and the influence of demand at auction on the secondary market. The results show that the demand at auction, measured by bid dispersion, is positively related to the bid-to-cover ratio but is negatively associated with the percentage of accepted competitive bids as well as the percentage of noncompetitive bids. Post-auction returns are positively related to demand at auction. The findings suggest the existence of arbitrage opportunities resulting from the price discrepancy between the auction and the secondary market when the demand for Treasury securities at auction is high.

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File URL: http://mpra.ub.uni-muenchen.de/52026/
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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 52026.

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Date of creation: 13 Sep 2011
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Publication status: Published in Academy of Economics and Finance Journal 1.3(2012): pp. 23-32
Handle: RePEc:pra:mprapa:52026

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Related research

Keywords: Treasury securities; primary market bidding; secondary market bidding;

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References

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  1. Paul Klemperer, 2002. "What Really Matters in Auction Design," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 16(1), pages 169-189, Winter.
  2. Kjell G. Nyborg & Ilya A. Strebulaev, 2003. "Multiple Unit Auctions and Short Squeezes," Working Papers, Fondazione Eni Enrico Mattei 2003.27, Fondazione Eni Enrico Mattei.
  3. Cammack, Elizabeth B, 1991. "Evidence on Bidding Strategies and the Information in Treasury Bill Auctions," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 99(1), pages 100-130, February.
  4. Goldreich, David, 2007. "Underpricing in Discriminatory and Uniform-Price Treasury Auctions," Journal of Financial and Quantitative Analysis, Cambridge University Press, Cambridge University Press, vol. 42(02), pages 443-466, June.
  5. Lise Godbout & Paul Storer & Christian Zimmermann, 1999. "The Canadian Treasury Bill Auction and the Term Structure of Interest Rates," Cahiers de recherche CREFE / CREFE Working Papers, CREFE, Université du Québec à Montréal 75, CREFE, Université du Québec à Montréal.
  6. Michael J. Fleming, 2007. "Who buys Treasury securities at auction?," Current Issues in Economics and Finance, Federal Reserve Bank of New York, Federal Reserve Bank of New York, vol. 13(Jan).
  7. Nyborg, Kjell G. & Sundaresan, Suresh, 1996. "Discriminatory versus uniform Treasury auctions: Evidence from when-issued transactions," Journal of Financial Economics, Elsevier, Elsevier, vol. 42(1), pages 63-104, September.
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