Understanding Competitive Auctions in Bond Markets

Medium Fixed Income Securities Bond Markets

In the bond markets, various types of bonds offer different mechanisms for interest payments and principal return. One common way that newly issued bonds are sold is through an auction process. Understanding the nuances of this process is crucial for investors.

Which of the following statements about a competitive auction for U.S. Treasury bonds is true?

In a competitive auction, bidders specify the quantity of bonds they wish to purchase and the yield they are willing to accept.

Competitive bidders receive bonds at the lowest accepted yield, regardless of their own stated yield.

All bidders in a competitive auction are guaranteed to receive the full quantity of bonds they bid for.

Hint

Submitted12.9K

Correct11.6K

% Correct90%