Treasury auction method and underpricing: Evidence from Iceland
Document Type
Article
Publication Title
Journal of Financial Research
Publication Date
6-1-2025
Abstract
The Central Bank of Iceland replaced the discriminatory method used for auctioning treasury securities with the uniform-price method in 2009. We analyze underpricing before and after this institutional reform with a sample of 516 auctions organized from 2000 to 2018. After controlling for auction characteristics and financial market conditions, we find that underpricing is lower under the uniform-price method. However, this underpricing decline does not translate into a reduction in sovereign issuance cost. The emergence of overpricing, observed in the late part of our sample, coincides with the growing importance of commissions paid to primary dealers. Our results provide practical implications for governments, regulators, and market participants.
Volume
48
Issue
2
First Page
725
Last Page
756
DOI
10.1111/jfir.12428
Recommended Citation
Noel, A., & Wu, M. (2025). Treasury auction method and underpricing: Evidence from Iceland. Journal of Financial Research, 48 (2), 725-756. https://doi.org/10.1111/jfir.12428
ISSN
02702592
E-ISSN
14756803
