The Demand for Treasury Securities at Auction

Payam Bahamin, Richard Cebula (), Maggie Foley () and Robert Houmes

MPRA Paper from University Library of Munich, Germany

Abstract: This study empirically analyzes the demand for Treasury securities at auctions over the period October 1998 through July 2010 from the perspective of bid composition and the influence of demand at auction on the secondary market. The results show that the demand at auction, measured by bid dispersion, is positively related to the bid-to-cover ratio but is negatively associated with the percentage of accepted competitive bids as well as the percentage of noncompetitive bids. Post-auction returns are positively related to demand at auction. The findings suggest the existence of arbitrage opportunities resulting from the price discrepancy between the auction and the secondary market when the demand for Treasury securities at auction is high.

Keywords: Treasury securities; primary market bidding; secondary market bidding (search for similar items in EconPapers)
JEL-codes: D44 D70 G18 H62 H63 (search for similar items in EconPapers)
Date: 2011-09-13
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Published in Academy of Economics and Finance Journal 1.3(2012): pp. 23-32

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