Auctions of Public Debt Securities by the Central Bank of Brazil: A Study of the Factors of the Dispersion of Proposals for BBCs

Marcio Garcia and Leonardo B. Rezende ()

Brazilian Journal of Political Economy, 2000, vol. 20, issue 4, 369-386

Abstract: We aim at obtaining a simple econometric model that allows us to build a confidenceinterval for the dispersion of the bids made by financial institutions at the central bankweekly auctions of short-term securities in Brazil. Under competitive conditions (e. g., no coalitionbetween a few financial institutions) we assume that the bids’ dispersion is associatedwith the volatility of the daily interest rate futures prices and the daily interest rates that had prevailed during the days prior to the auction. Based on that assumption, our model succeedsin separating the two auctions with extremely high volatility. ln one of them, the highdispersion could be predicted using the other interest rate markets’ data; in the other the dispersionfell outside the confidence interval for the predicted dispersion. This can be used asempirical evidence of an attempt to comer the market that has indeed occurred at that date. JEL Classification: H63; E58.

Keywords: Public debt; public debt structure (search for similar items in EconPapers)
Date: 2000
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