We document pervasive overpricing in euro area Treasury auctions, challenging the conventional underpricing paradigm. Using a comprehensive 25-year panel covering 22 advanced economies, we show that overpricing is systematically higher in countries that rely more heavily on syndicated issuance. Leveraging a unique dataset of Portuguese auctions from 2004 to 2024 that tracks bidders, we demonstrate that overpricing reflects rational, incentive-compatible behavior driven by remuneration through syndication fees and post-auction non-competitive allocations. Dealers bid more aggressively when future issuance opportunities are most valuable. Our findings connect short-run auction losses to long-run cumulative profits, linking micro-level bidding behavior to macro-level institutional design.
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