Hi guys!
I couldn’t seem to find a clear answer in the book. During a treasury bill or note or bond issue, there is an auction process where all competitive bidders’ bids are ranked by the yield. What is the yield used? Is it the discount yield? The YTM?
Another question I have for the auction is that, is the auctioned size the total par value of the bond or the total purchase price?
Thank you!
Re yield bid: The bid is expressed in whichever yield the security is normally quoted. So for note and bond auctions it’s YTM, for bill auctions it’s a discount yield (discount rate IRL).
When the auctions are announced, the size is quoted in par amounts (though the face value is more typically used when discussing bills). After the auction is completed the Treasury does announce the total amount raised, but that is after the fact.
Thank you!