The Canadian treasury bill auction and the term structure of interest rates
This 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.
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