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Bid Shading and Bidder Surplus in the U.S. Treasury Auction System

Ali Hortaçsu, Jakub Kastl and Allen Zhang

No 24024, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We analyze bidding data from uniform price auctions of U.S. Treasury bills and notes between July 2009-October 2013. Primary dealers consistently bid higher yields compared to direct and indirect bidders. We estimate a structural model of bidding that takes into account informational asymmetries introduced by the bidding system employed by the U.S. Treasury. While primary dealers’ estimated willingness-to-pay is higher than direct and indirect bidders’, their ability to bid-shade is even higher, leading to higher yield/lower price bids. Total bidder surplus averaged to about 3 basis points across the sample period along with efficiency losses around 2 basis points.

JEL-codes: G12 L1 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-des, nep-fmk and nep-gth
Date: 2017-11
Note: AP IO
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