ABSTRACT
The US Treasury expects to sell about a trillion dollars of new securities this fiscal year to finance a projected $400 billion budget deficit and to refinance maturing debt. Most of the securities will be issued through public auctions, where competition among bidders might be expected to minimize interest payments on the debt. The Treasury maintains a regular schedule of auctions in which it sells bonds, notes, and bills. Making auction awards at multiple prices means that the highest bidders must follow through, actually paying the prices they offered even though others are paying less for the identical security. Sealed bidding when coupled with multiple prices enables a single bidder to corner the postauction market, transforming the auction-winner's curse into a postauction blessing. Treasury auctions contain an important safeguard against cornering the supply of a new issue; a single bidder is prohibited from acquiring more than 35% of an issue.
