U.S. Treasury Auctions (A) Harvard Case Solution & Analysis

U.S. Treasury Auctions (A) Case Solution

The USA Department of Treasure conducted auctions in order to seal its statements since their introduction in 1929. In this auction format, buyers submitted secret bids on winning bidders and the new securities paid the cost of its own bid along with different costs for different bidders. When prohibited manipulations by a trader at Salomon Brothers came to light in 1991 this traditional process came under sharp attack by several leading economists. On September 3, 1992, the Treasury announced as a pilot program, that it would conduct a single-price covered bid auction of its notes of 2 and years for a small period of time.

In the single-price sealed bid auction, secret bids were again submitted by participants in contrast to the multiple-price auction, a single clearing price was determined that equalized supply and demand.

PUBLICATION DATE: September 28, 2004

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