Maturity Composition and the Demand for Government Debt

Jason Allen, Jakub Kastl and Milena Wittwer
Additional contact information
Jakub Kastl: Princeton University
Milena Wittwer: Boston College

Working Papers from Princeton University. Economics Department.

Abstract: We analyze ways to reduce funding costs when issuing government debt, without changing the level of debt. Leveraging an institutional feature that auctions of different Treasury securities are held simultaneously, we propose and implement a method for estimating own-and cross-security demand elasticities, avoiding the usual endogeneity issues in demand estimation. We show that these elasticities, together with the auction format, determine how to optimally allocate debt across securities. Starting from an equal supply split between two securities, a government can save money by issuing less of the price-sensitive and more of the price-insensitive security in a discriminatory price auction, and vice versa in a uniform price auction.

Keywords: Multi-unit auctions; structural estimation; market segmentation; government bonds; demand elasticities (search for similar items in EconPapers)
JEL-codes: C14 D44 E58 G12 (search for similar items in EconPapers)
Date: 2022-03
New Economics Papers: this item is included in nep-des
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.princeton.edu/~jkastl/dealers_202203.pdf

Related works:
Working Paper: Maturity Composition and the Demand for Government Debt (2020)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pri:econom:2022-12

Access Statistics for this paper

More papers in Working Papers from Princeton University. Economics Department. Contact information at EDIRC.
Bibliographic data for series maintained by Bobray Bordelon ().