In US treasury auction (for bonds and notes), my understanding is that the highest bidder's price (and rate) is applied for all the buyers.

Assume a buyer 'A' who plans to buy a smaller number of bond shares. Let two other players 'B' and 'C' invest heavily compared to 'A. Let 'B' and 'C' be competitors of 'A'.

Is it possible for 'A' to invest low but bid high thus play spoilsport for 'B' and 'C'?

  • $\begingroup$ Different countries have different types of treasury auctions. Please clarify the exact auction you are talking about. $\endgroup$ – Giskard Feb 17 '18 at 15:32
  • $\begingroup$ I meant the US gov treasury auction for bonds and notes. $\endgroup$ – Kannan Feb 17 '18 at 15:52
  • $\begingroup$ I edited the question with specific auction details. $\endgroup$ – Kannan Feb 17 '18 at 16:03

No. The auction uses the highest yield, which means the lowest price (for the same coupon). That is, for bonds, price up -> yield down (and vice versa). (The only tricky bit is that the coupon is not known until the auction concludes.)

For a discussion of U.S. Treasury bond structure: link to TreasuryDirect.

Not all bonds are issued via an auction process (one alternative is “tapping” issues). Sweden is an example of using a multi-price auction - link to Swedish auction description.


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