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Open Access Publications from the University of California

The Treasury Bill Auction and the When-Issued Market: Some Evidence


We empirically examine the link between the when-issued market and the auction for Treasury bills. We find that on average it is cheaper to buy Treasury bills in the auction than in the when-issued market just before the auction closes. Surprisingly, primary dealers often submit bids in the auction that are higher in price than the concurrent when-issued ask price. We present evidence to show that this is due to the cost of revealing positive information too early by trading in when-issued markets before the auction. In addition, we examine what determines the dispersion of bids in the auction as well as test for collusive behavior in the bidding process.

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