An important matter for the Swedish National Debt Office and other government debt management offices is the choice of auction format for issuing government securities. The two predominant procedures from which to choose are the multiple-price auction and the single-price auction. This Debt Office Commentary describes how both theory and empirical studies indicate that the auction format should be chosen on the basis of how well the pricing works.
For a market exhibiting low liquidity and significant pricing uncertainty, single-price auctions are preferable. This is because they reduce uncertainty for the bidder and can thereby increase the incentive to participate. An example of such a market is the Swedish market for inflation-linked bonds, which suggests that it would be more cost-effective to issue inflation-linked bonds through single-price auctions instead of multiple-price auctions.
The authors of “The choice of auction format is influenced by market dynamics” are Daniel Wayland and Erik von Schedvin.
Read Debt Office Commentary No 4 2024
A Debt Office Commentary is part of a series of essays in which Swedish National Debt Office employees contribute to furthering the understanding of a relevant subject. Debt Office Commentary number 4 2024 is about the choice of auction format for the issuance of government securities.
