Abstract:

Based on previous research addressing the behavior of market yields around Treasury bond auctions, we examine the presence of the auction cycle and the corresponding so-called V-inversed pattern of yields in the case of the Romanian bond market. We find evidence that for the 4- and 5-year on-the-run papers there was a statistically significant increase in yield in the auction day compared to the day before. Also, for the 5-year on-the-run T-bonds, market yields revealed a day-on-day increase in the day preceding the auction as well. For the day following the auction, however, results were not statistically significant under any level of significance, so we could only conclude for the existence of a partial auction cycle. One finding suggestive for the V-inversed pattern of the secondary market yields was observed for the on-the-run 2-year government securities. Our results turned significant for an increase in yield in the day preceding the auction and a decrease in the day following the auction, which is thus consistent with a V-inversed pattern. However, in this case, there was no conclusive proof regarding the increase in yield from the auction day. Also, we investigated the intraday behavior of market yields during auction days.