The Auctions of Swiss Government Bonds: Should the Treasury Price Discriminate or Not?

14 Pages Posted: 14 May 1998

See all articles by Daniel Heller

Daniel Heller

Swiss National Bank

Yvan Lengwiler

University of Basel - Faculty of Business and Economics (WWZ)

Date Written: January 14, 1998

Abstract

Ever since Friedman's (1960) contribution, there has been an ongoing controversy about whether the Treasury should auction off its government debt with a discriminatory or with a uniform price format. Many industrialized countries, the United States or Germany, for instance, use discriminatory auctions, while Switzerland applies to uniform price rule. Using recent contributions to multi-unit auction theory, we analyze data on the bids submitted to Swiss Treasury bond auctions over the last three years. We then construct hypothetical bid functions that would occur under price discrimination. Based on these bid functions, we determine which auction format minimizes the government's costs of financing its debt.

JEL Classification: D44, H63

Suggested Citation

Heller, Daniel and Lengwiler, Yvan, The Auctions of Swiss Government Bonds: Should the Treasury Price Discriminate or Not? (January 14, 1998). Board of Governors of the Federal Reserve System Finance and Economics Discussion Series FEDS Paper No. 98-11. Available at SSRN: https://ssrn.com/abstract=87608 or http://dx.doi.org/10.2139/ssrn.87608

Daniel Heller

Swiss National Bank ( email )

Borsenstrasse 15
CH-8022 Zurich
Switzerland
+41 1 631 3726 (Phone)
+41 1 631 3901 (Fax)

Yvan Lengwiler (Contact Author)

University of Basel - Faculty of Business and Economics (WWZ) ( email )

Peter Merian-Weg 6
PO Box
Basel, CH-4002
Switzerland
+41 61 267 3369 (Phone)

HOME PAGE: http://wwz.unibas.ch/lengwiler

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