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U.S. Treasury Auction Yields During Boom, Bust, and Quantitative Easing: Role for Fed and Foreign Purchasers

Author

Listed:
  • Catherine L. Mann

    () (International Business School, Brandeis University)

  • Oren Klachkin

Abstract

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.

Suggested Citation

  • Catherine L. Mann & Oren Klachkin, 2011. "U.S. Treasury Auction Yields During Boom, Bust, and Quantitative Easing: Role for Fed and Foreign Purchasers," Working Papers 47, Brandeis University, Department of Economics and International Businesss School, revised May 2012.
  • Handle: RePEc:brd:wpaper:47
    as

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    File URL: http://www.brandeis.edu/economics/RePEc/brd/doc/Brandeis_WP47.pdf
    File Function: Revised version, 2012
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    References listed on IDEAS

    as
    1. 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.
    2. Dong Lou & Hongjun Yan & Jinfan Zhang, 2013. "Anticipated and Repeated Shocks in Liquid Markets," Review of Financial Studies, Society for Financial Studies, vol. 26(8), pages 1891-1912.
    3. Pasquariello, Paolo & Vega, Clara, 2009. "The on-the-run liquidity phenomenon," Journal of Financial Economics, Elsevier, vol. 92(1), pages 1-24, April.
    4. 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.
    5. 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.
    6. Christopher J. Neely, 2010. "The large scale asset purchases had large international effects," Working Papers 2010-018, Federal Reserve Bank of St. Louis.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Federal Reserve; Quantitative easing; Foreign official; Dutch auction; US Treasury securities;

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • F49 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Other

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