NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Bid Shading and Bidder Surplus in the U.S. Treasury Auction System

Ali Hortaçsu, Jakub Kastl, Allen Zhang

NBER Working Paper No. 24024
Issued in November 2017
NBER Program(s):Asset Pricing, Industrial Organization

We analyze bidding data from uniform price auctions of U.S. Treasury bills and notes between July 2009-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 U.S. 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 3 basis points across the sample period along with efficiency losses around 2 basis points.

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Document Object Identifier (DOI): 10.3386/w24024

 
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