U.S. Government Securities Underwriting

Question 1

How does the US Gov’t sell its debt?

Answer 1

It uses an AUCTION system. There is no underwriter

Question 2

What types of auctions are the auctions for treasurys?

Answer 2

Yield Auctions. The lowest rate bid wins

Question 3

Who acts as the fiscal agent for Treasurys?

Answer 3

the Federal Reserve

Question 4

What T-bills are auctioned weekly?

Answer 4

4, 13, and 26 week T-bills.

Question 5

What t-bills are auctioned monthly on tuesday

Answer 5

52 week t-bills

Question 6

What auction are T-STRIPS sold in?

Answer 6

They are sold in the same auction as all the others

Question 7

What is the difference between competitive and non-competitive bids on US Treasurys?

Answer 7

• Competitive bids specify the interest rate - lowest bid always win, but they are not always filled
• Non-competitive bids are always filled (don’t specify the interest rate) and are usually placed by SMALL investors

Question 8

What is the minimum and maximum for NON competitive bids at T-Bill auctions?

Answer 8

The minimum is $100 and the max is $5,000,000

Question 9

What is the minimum competitive bid at T-Bill auctions?

Answer 9

$5,000,000. There is no dollar maximum except a 35% of securities offered max

Question 10

When are treasurys paid for?

Answer 10

As of date of issuance (not on auction date).
T - bills: Thursday of that week
T-notes, bonds and TIPS: the 15th of the month

Question 11

How do Federal Agencies go about underwriting?

Answer 11

There is NO competitive bidding, only negotiated offerings. There is no registration and no prospectus (exempt). They use pre-sale orders and set the Coupon rate so the issue will sell at PAR