Definition of treasury auctions

Treasury auctions are the most common selling mechanism for sovereign debt in many countries.

When submitting a bid to participate in an auction, investors have to indicate the amount that they want to buy as well as the price that they want to pay for it.

The sellers around the world mainly use two basic auction formats to determine the amount to allocate to each bidder and the price the bidder has to pay.  These are discriminatory-price auctions in which bidders have to pay the price they bid for, and uniform-price auctions in which each bidders pays the same price.

The United States used discriminatory price auctions until the 1990s and then switched to a uniform-price auction format to sell its Treasury securities. Other countries such as Germany have traditionally used a discriminatory-price auction format. Furthermore, selling mechanisms differ across countries by the discretion the seller keeps after observing the actual demand, e.g. by varying the supply and not allocating the whole announced issue volume to investors. [1]