Series 50: Auction

Auction

Let’s look at how the bidding process works for a Treasury security. Treasury securities are sold through a Dutch auction procedure.

In a Dutch auction, investors place bids for the number of shares they would like to buy and the price they are willing to pay within a given price range. The procedure starts accepting bids from the highest on down until all shares are sold. The lowest bid that is accepted is offered to all shareholders with accepted bids.

Example: The U.S. TreasuryDirect would like to sell 1,000,000 five-year T-notes. It will invite investors to bid on these notes. It receives the following bids.

Bid A: 200,000