At Pag. 298 (Vol. V) I read: ‘For the regular auction cycle/single-price method. there is a regular auction cycle, and all winning bidders are awarded securities at the highest yield accepted by the government’ I don’t understand… why highest yield? Is It not preferable for government ‘sell’ securities at the lowest yield? Thanks Ludwma
It’s not so clear… I don’t understand why the non-competitive bidders can obtain the securities at the highest yield…
My guess is that this is similar to Central govt’s “Tap” method to sell its securities. Here, the sale is at “a” price, at which it would attract more bidders who want to cash-in. The goal here is may be to just drain the “Cash” out of the system, a goal guided by its monetary policy. Otherwise, which is about price, it is just a move as any other investor would.
This is effectively the highest yield that clears the whole auction ammount, makes it far cleaner. Not the highest bids they actually receive for the bill/note/bond being auctioned, just those up to the ammount tendered. Doubt it will come up, but a single buyer is not allowed to buy more than 1/3 rd of total ammount of an individual auction, fed call up and everything,almost embarassing!