Discriminatory Versus Uniform Treasury Auctions
Kjell G. Nyborg
University of Zurich - Department of Banking and Finance; Centre for Economic Policy Research (CEPR); Swiss Finance Institute
Suresh M. Sundaresan
Columbia Business School - Finance and Economics
London Business School Institute of Finance and Accounting Working Paper 198
We use when-issued transactions data to assess the US Treasury's current experiment with uniform auctions. When-issued volume is higher under uniform as compared to discriminatory auctions, suggesting a higher information release, which should reduce pre-auction uncertainty and the winner's curse. Consistent with this, mark-ups tend to be smaller under uniform auctions. Also, under uniform auctions, when-issued volatility falls after the auction and again after the outcome announcement. The pattern is the opposite for discriminatory auctions. This is further evidence that uniform auctions increase pre-auction information production and lower the short squeeze.
JEL Classification: G20working papers series
Date posted: August 29, 1998
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