Working Paper: NBER ID: w24024
Authors: Ali Hortasu; Jakub Kastl; Allen Zhang
Abstract: 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.
Keywords: Bid shading; Bidder surplus; US Treasury auctions; Market power; Auction design
JEL Codes: G12; L1
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| primary dealers (G24) | bid shading (D44) |
| market power (L11) | bid shading (D44) |
| bid shading (D44) | bidder surplus (D44) |
| primary dealers (G24) | higher yields (Q15) |
| market power (L11) | higher yields (Q15) |
| primary dealers (G24) | lower prices (P22) |
| bid shading (D44) | lower prices (P22) |
| primary dealers (G24) | efficiency losses (D61) |