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Auction Mechanisms and Bidding Behavior in Bond Markets: Evidence from China

Wednesday, 21 February 2018
15:30 to 17:00
Hisayuki Yoshimoto, University of Glasgow
Durham University Business School, MHL 223

Economics and Finance External Seminar.


We exploit the institutional set-up of four Chinese Government treasury security issuers: the Ministry of Finance, the Chinese Development Bank, the Export-Import Bank, and the Agriculture Development Bank to investigate whether treasury securities should be sold through the Spanish auction mechanism or through the traditional discriminatory- or uniform-price auction formats. We show that the Spanish auction mechanism generates the lowest yield rates (highest prices), followed by the uniform-price format, and the discriminatory-price format generates the highest yields. Finally, we quantify the winner's curse associated with uniform-price auctions.