MARKUPS, QUANTITY RISK, AND BIDDING STRATEGIES AT TREASURY COUPON AUCTIONS

This study uses intraday when-issued rate quotes to examine the reward s and risks of the Treasury coupon auctions for bidders who face diffe rent tradeoffs between the winner's curse and quantity risk. The data indicate that markups of auction average rates over bid when-issued ra tes at auction times average 3/8 basis point. I also find that when-is sued rates react as strongly to bidding aggressiveness at auctions bef ore the auction results are announced as they do afterward, and that q uantity risk is as important as the winner's curse.