INFLUENCE OF TREASURY BILL FUTURES TRADING ON THE PRIMARY SALE OF THE DELIVERABLE TREASURY BILL |
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| Authors: | Dennis J Lasser |
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| Institution: | University of Miami, Coral Gables, FL 33124. This research was supported by a Summer Research Grant from the University of Miami Corporate Affiliate Program. I would like to thank the members of the University of Miami Finance Workshop as well as Robert Jennings and Howard Potter for their comments and suggestions. I would also like to thank William Kokontis for providing much of the data used in the study. Remaining errors are, of course, the author's responsibility. |
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| Abstract: | This paper investigates the impact of the presence of Treasury bill (T-bill) futures market contracts on the primary auction price of deliverable T-bills. Of the 52 weekly three- and six-month T-bill auctions, only four are deliverable against the T-bill futures market contract. This unique ability to deliver may command a premium price in the primary market. The results of this study support this hypothesis with regard to the six-month auction but are inconclusive with regard to the three-month auction. Furthermore, there is some evidence that the 1983 rule change making the one-year T-bill a deliverable instrument reduced the size of the premium in the six-month bill auction. |
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