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ANOMALOUS BIDDING IN SHORT‐TERM TREASURY BILL AUCTIONS*
Author(s) -
Fleming Michael J.,
Garbade Kenneth D.,
Keane Frank
Publication year - 2005
Publication title -
journal of financial research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.319
H-Index - 49
eISSN - 1475-6803
pISSN - 0270-2592
DOI - 10.1111/j.1475-6803.2005.00119.x
Subject(s) - treasury , bidding , inefficiency , common value auction , cash , profit (economics) , economics , maturity (psychological) , monetary economics , microeconomics , business , financial economics , finance , psychology , developmental psychology , archaeology , history
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.