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Treasury Auction Bids and the Salomon Squeeze

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  • Jegadeesh, Narasimhan

Abstract

Recent press accounts claim that collusion is common practice in Treasury auctions and that as a result the auction profits are excessive. But, this paper finds that the auction prices are on average marginally higher than the secondary market bid prices. The auction profits, however, are systematically related to the total fraction of winning bids tendered by banks and dealers. The postauction prices of the two-year notes in which Salomon Brothers had a 94 percent holding are also examined. The secondary market prices of these notes were significantly higher than the estimated competitive prices in the four-week postissue period. Copyright 1993 by American Finance Association.

Suggested Citation

  • Jegadeesh, Narasimhan, 1993. "Treasury Auction Bids and the Salomon Squeeze," Journal of Finance, American Finance Association, vol. 48(4), pages 1403-1419, September.
    • Handle: RePEc:bla:jfinan:v:48:y:1993:i:4:p:1403-19
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