Bidding Behavior in Treasury Bill Auctions: Evidence From Pakistan

Author: International Monetary Fund

Behavior in the first three years of auctions for Pakistani treasury bills is studied. Bidding strategies rapidly converged to a consistent pattern after the auctions started in 1991. Factors are identified that influenced the expected profitability of auction participation, which was on average low and did not differ between types of bidders. Prices bid are found to reflected both 'buy and sell' and 'buy and hold' strategies, and were affected by risk considerations and bidder-specific variables. The Pakistani experience suggests the robustness of auctions as a market-based allocation mechanism, and their value in public debt management.

Volume/Issue: Volume 2000 Issue 111

Publication date: June 2000

ISBN: 9781451853469

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Topics covered in this book

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Business and Economics , Banks and Banking , Investments and Securities-General , Public Finance , WP , prices bid , cut-off price , bid schedule , bid shading , risk terms , volume bid reverse sign , auctions , Pakistan , treasury bills , Treasury bills and bonds , Government securities , Government debt management , Estimation techniques , Commercial banks

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Summary

Behavior in the first three years of auctions for Pakistani treasury bills is studied. Bidding strategies rapidly converged to a consistent pattern after the auctions started in 1991. Factors are identified that influenced the expected profitability of auction participation, which was on average low and did not differ between types of bidders. Prices bid are found to reflected both ‘buy and sell’ and ‘buy and hold’ strategies, and were affected by risk considerations and bidder-specific variables. The Pakistani experience suggests the robustness of auctions as a market-based allocation mechanism, and their value in public debt management.