Insights into Auction Dynamics: Exploring Drivers of Market Demand in Turkish Government Domestic Bond Auctions

Irfan Cercil, Cem Ali Gokcen and Sule Senel Tabak

CBT Research Notes in Economics from Research and Monetary Policy Department, Central Bank of the Republic of Turkey

Abstract: [EN] Even though the sovereign bond auctions play a crucial role for public finance and debt management, the demand side of these auctions has not been studied thoroughly in the related literature. This paper analyzes the drivers of market demand in the Government Domestic Borrowing Securities (GDBS) auctions held by the Republic of Türkiye Ministry of Treasury and Finance. Accordingly, total price bids submitted is used as the measure of auction demand for 2, 5, and 10-year government bonds. A broad set of variables representing the auction and bond specific, macroeconomic and financial conditions are used to identify the determinants of demand at government bond auctions. As there is a large number of explanatory variables that can determine the demand and only a limited number of bond auctions, Weighted Average Least Squares (WALS) estimator, which is one of the model averaging techniques used in literature, is applied as the statistical method. The main results of this paper can be summarized as follows: newly issued bonds receive higher demand than other bonds, both FX volatility and financial market volatility weigh on demand, and an increase in the secondary market liquidity of bonds has a positive impact on the auction demand. Furthermore, it is shown that an increase in inflation expectations reduces the demand for 10-year GDBS auctions, and there are seasonal factors at play as confirmed by the decreased auction demand in December. [TR] Devlet tahvili ihaleleri kamu finansmani ve borc yonetimi acisindan onemli bir rol oynamasina ragmen soz konusu ihalelerin talep tarafi ilgili yazinda yeterince ele alinmamistir. Bu calisma, Turkiye Cumhuriyeti Hazine ve Maliye Bakanligi tarafindan duzenlenen devlet ic borclanma senedi (DIBS) ihalelerine yonelik piyasa talebinin temel belirleyicilerini analiz etmektedir. Bu kapsamda, ihale talebi gostergesi olarak 2, 5 ve 10 yil vadeli tahvil ihalelerine gelen toplam fiyatli teklif tutari kullanilmaktadir. Soz konusu talep gostergesi, ihalelere ve kiymetlere ozgu faktorlere ilaveten makroekonomik ve finansal kosullari iceren genis bir aciklayici degisken seti kullanilarak incelenmektedir. Talebi belirleme potansiyeli oldugu dusunulen fazla sayidaki degiskene karsilik sinirli sayida ihale verisi bulundugu icin istatistiki yontem olarak literaturde kullanilan ve model ortalamasi yontemlerinden birisi olan Agirlikli Ortalama En Kucuk Kareler (AOEKK) tahmincisi uygulanmaktadir. calismanin ana bulgulari; kiymetlerin ilk ihraclarinda diger ihraclardan daha fazla talep gordugu, gerek kur oynakligi gerekse finansal piyasa oynakliklarinin talebi azalttigi ve tahvillerin ikincil piyasa likiditelerindeki artisin soz konusu tahvillerin ihale talebini olumlu yonde etkiledigi seklinde ozetlenebilmektedir. Ilaveten, enflasyon beklentilerindeki artisin 10 yil vadeli DIBS ihalelerine yonelik talebi azalttigi ve Aralik ayinda yapilan ihalelere gelen talebin dusuk olmasinin teyit ettigi uzere, mevsimsel faktorlerin de etkili oldugu gosterilmektedir.

Date: 2024
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