Treasury auctions: what do the recent models and results tell us?

Auctions, as selling mechanisms, have existed for well over two thousand years. Today, one of the most important auction markets in the world is that of U.S. Treasury securities; approximately $2 trillion worth of Treasury securities was auctioned in 1995. ; A long-standing debate has been about selecting an appropriate auction format for various Treasury securities, a format that would be least subject to possible manipulation by individual traders or a cartel and also result in the highest possible revenues for the Treasury. The Treasury is currently experimenting with what is called a uniform-price format for auctioning two- and five-year Treasury notes. A similar mechanism might be put into broader use. ; This article explains Treasury auctions in light of recent theoretical research and related empirical evidence. Empirically there seems to be no discernible difference between discriminatory and uniform-price auctions in terms of revenue to the Treasury. The author concludes that the proposal to switch to electronic ascending-price open-outcry auctions with an implied uniform price may be worthy of more consideration.Auctions ; Financial markets ; Treasury notes