Tuesday, April 29, 2014

underwriting outline

Treasury securities
  • treasury bills
  • treasury notes
  • treasury bonds
  •  offered by auction
  • competitive bidders, broker dealers, large banks, money centers-$1 million or more-bid within interest rate Fed wants
  • noncompetitive bidders, buy $1000-$1,000,000, will always get bonds
  • all bidders get T-bills at same yield
  • T-bills, T-notes, T-bonds-winning bids get securities at one set price
  • T-bill auction-Monday and Tuesday
  • payment due Thursday in cash, banks- as federal funds, rollover-maturing Treasry security
  • individuals roll over maturing T-bills or deposit a check before auction date
  • banks, large institutions set up federal funds account with Fed and pay on Thu payment due
  • notes-auction 2nd and 4th Wed, payment due on 15th or last day of mo
  • no prospectus, no official statement required
  • exempt from Securities Act of 1933
  • negotiated underwriting
  • issued at price close to par
Noncompetitive bidders for U.S. government T-bills receive which of the following yields at auction?
  • the highest yield
  • competitive bidders determine yield
  • noncompetitive bidders get T-bills first at highest yield 

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