Anomalous Bidding in Short-Term Treasury Bill Auctions

Posted: 4 May 2004

See all articles by Michael J. Fleming

Michael J. Fleming

Federal Reserve Bank of New York

Kenneth Garbade

Federal Reserve Bank of New York

Frank M. Keane

Federal Reserve Banks - Federal Reserve Bank of New York

Multiple version iconThere are 2 versions of this paper

Abstract

We show that Treasury bill auction procedures create classes of price-equivalent discount rates for bills with less than 72 days to maturity. We argue that it is inefficient for market participants to bid at a discount rate that is not the minimum rate in its class. The inefficiency of bidding at other than the minimum rate is related to a quantity shortfall rather than an unexploited profit opportunity. Auction results for weekly offerings of four-week bills and occasional offerings of cash management bills show that market participants frequently bid at inefficient rates. However, they are more likely to bid at efficient rates than chance would suggest.

Keywords: Treasury bills, auctions, bidding

JEL Classification: G14, H63

Suggested Citation

Fleming, Michael J. and Garbade, Kenneth and Keane, Frank M., Anomalous Bidding in Short-Term Treasury Bill Auctions. Available at SSRN: https://ssrn.com/abstract=539562

Michael J. Fleming (Contact Author)

Federal Reserve Bank of New York ( email )

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HOME PAGE: http://www.newyorkfed.org/research/economists/fleming/

Kenneth Garbade

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States

Frank M. Keane

Federal Reserve Banks - Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States
(212) 720-6079 (Phone)
(212) 720-1941 (Fax)

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