Markups, quantity risk, and bidding strategies at treasury coupon auctions

Simon, David P.

doi:10.1016/0304-405x(94)90017-5

“…Second, a negative relationship has been found between Treasury supply and prices. Individual issue sizes are examined in Simon (1991Simon ( , 1994, Duffee (1996), and Fleming (2002) Our analysis differs from the existing literature in several ways. First, our primary interest is in dealer compensation for the risk associated with inventory changes as evidenced by future appreciation of these positions.…”

Section: Asset Pricing Effects Of Dealer Position Managementmentioning

confidence: 43%

“…First, a number of studies have shown that dealers are compensated for participating in the primary market in that Treasuries tend to be auctioned at prices lower than those in the secondary market, e.g., Cammack (1991), Spindt and Stolz (1992), and Simon (1994). Second, a negative relationship has been found between Treasury supply and prices.…”

Section: Asset Pricing Effects Of Dealer Position Managementmentioning

confidence: 99%

How do Treasury Dealers Manage their Positions?

Fleming

¹

,

Rosenberg

²

2007

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractUsing data on U.S. Treasury dealer positions from 1990 to 2006, we find evidence of a significant role for dealers in the intertemporal intermediation of new Treasury security supply. Dealers regularly take into inventory a large share of Treasury issuance so that dealer positions increase during auction weeks. These inventory increases are only partially offset in adjacent weeks and are not significantly hedged with futures. Dealers seem to be compensated for the risk associated with these inventory changes by means of price appreciation in the subsequent week.

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“…A first line of studies compares the average yield bid in the auction to the yield on another instrument, which at the time of the auction is almost identical to the auctioned bond. Examples of such studies are Simon (1994), Nyborg and Sundaresan (1996) and Goldreich (2007). They find a small underpricing of treasury auction securities in the order of magnitude of a 1 basis point higher yield.…”

Section: Evidence From the Literature On Yield Effects Of Auctionsmentioning

confidence: 99%

Price effects of sovereign debt auctions in the euro-zone: The role of the crisis

Beetsma

¹

,

Giuliodori

²

,

Jong

³

et al. 2016

Journal of Financial Intermediation

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. In 2013 all ECB publications feature a motif taken from the €5 banknote. Terms of use: Documents in EconStor may

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“…Short banks that do not obtain adequate funds in the auction may risk being squeezed in the interbank market; they may be charged an above fair market borrowing rate. That is, they face the loser's nightmare [Simon (1994), Nyborg and Sundaresan (1996)]. Since banks can always borrow (against collateral) at the ECB's marginal lending facility, the loser's nightmare costs a bank at most 100 basis points per unit it is short.…”

Section: The Loser's Nightmarementioning

confidence: 99%