U.S. Treasury Auction Yields During Boom, Bust, and Quantitative Easing: Role for Fed and Foreign Purchasers
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.
|Date of creation:||Nov 2011|
|Date of revision:||May 2012|
|Contact details of provider:|| Postal: MS032, P.O. Box 9110, Waltham, MA 02454-9110|
Web page: http://www.brandeis.edu/departments/economics/
More information through EDIRC
References listed on IDEAS
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.:
- Joseph E. Gagnon & Matthew Raskin & Julie Remache & Brian P. Sack, 2010.
"Large-scale asset purchases by the Federal Reserve: did they work?,"
441, Federal Reserve Bank of New York.
- Joseph E. Gagnon & Matthew Raskin & Julie Remache & Brian P. Sack, 2011. "Large-scale asset purchases by the Federal Reserve: did they work?," Economic Policy Review, Federal Reserve Bank of New York, issue May, pages 41-59.
- Jesus Sierra, 2014. "International Capital Flows and Bond Risk Premia," Quarterly Journal of Finance (QJF), World Scientific Publishing Co. Pte. Ltd., vol. 4(01), pages 1-36.
- Christopher J. Neely, 2010. "The large scale asset purchases had large international effects," Working Papers 2010-018, Federal Reserve Bank of St. Louis.
- Francis E. Warnock & Veronica C. Warnock, 2005.
"International capital flows and U.S. interest rates,"
International Finance Discussion Papers
840, Board of Governors of the Federal Reserve System (U.S.).
- Francis E. Warnock & Veronica Cacdac Warnock, 2006. "International Capital Flows and U.S. Interest Rates," NBER Working Papers 12560, National Bureau of Economic Research, Inc.
- Francis E. Warnock & Veronica C. Warnock, 2005. "International Capital Flows and U.S. Interest Rates," The Institute for International Integration Studies Discussion Paper Series iiisdp103, IIIS.
- Pasquariello, Paolo & Vega, Clara, 2009. "The on-the-run liquidity phenomenon," Journal of Financial Economics, Elsevier, vol. 92(1), pages 1-24, April.
- Hongjun Yan & Jinfan Zhang & Dong Lou, 2011.
"Anticipated and Repeated Shocks in Liquid Markets,"
FMG Discussion Papers
dp684, Financial Markets Group.
- Hongjun Yan, 2011. "Anticipated and Repeated Shocks in Liquid Markets," Yale School of Management Working Papers amz2675, Yale School of Management.
- Jinfan Zhang & Hongjun Yan & Dong Lou, 2011. "Anticipated and Repeated Shocks in Liquid Markets," 2011 Meeting Papers 1446, Society for Economic Dynamics.
- 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.
When requesting a correction, please mention this item's handle: RePEc:brd:wpaper:47. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Leslie Yancich)
If references are entirely missing, you can add them using this form.