Bid Shading and Bidder Surplus in the US Treasury Auction System
Ali Hortaçsu, Jakub Kastl, Allen Zhang
American Economic Review · 2018 · Volume 108 · Issue 1
Abstract
We analyze bidding data from uniform price auctions of US Treasury bills and notes between July 2009 and October 2013. Primary dealers consistently bid higher yields compared to direct and indirect bidders. We estimate a structural model of bidding that takes into account informational asymmetries introduced by the bidding system employed by the US Treasury. While primary dealers' estimated willingness-to-pay is higher than direct and indirect bidders', their ability to bid-shade is even higher, leading to higher yield/lower price bids. Total bidder surplus averaged to about three basis points across the sample period along with efficiency losses around two basis points.
Keywords
Auctions, Comparative or Joint Analysis of Fiscal and Monetary Policy, Stabilization, Treasury Policy, National Debt, Debt Management, Sovereign Debt
Enable JavaScript for citation tools and additional paper interactions.