Sovereign Debt Auctions: Uniform or Discriminatory?
New York University (NYU) - Department of Finance
Hebrew University of Jerusalem - Jerusalem School of Business Administration
Hebrew University of Jerusalem - Department of Finance
March 1, 2009
Journal of Monetary Economics, Vol. 56, No. 2, 2009
Many financial assets, especially government bonds, are issued by an auction. An important feature of the design is the auction pricing mechanism: Uniform vs. Discriminatory. Theoretical papers do not provide a definite answer regarding the dominance of one type of auction over the other. We investigate the revealed preferences of the issuers by surveying the sovereign issuers that conduct auctions. We find that the majority of the issuers/countries in our sample use a discriminatory auction mechanism for issuing government debt. We use a multinomial logit procedure and discriminatory analysis to investigate the mechanism choice. It was interesting to find that market oriented economies and those that practice Common law tend to use a uniform method while economies who are less market oriented and practice Civil law tend to use discriminatory price auctions.
Keywords: Uniform auction, Discriminatory auction, Treasury bonds, T-bills
JEL Classification: G1, F3
Date posted: April 28, 2009