• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to footer
Finance Train

Finance Train

High Quality tutorials for finance, risk, data science

  • Home
  • Data Science
  • CFA® Exam
  • PRM Exam
  • Tutorials
  • Careers
  • Products
  • Login

Four Methods of Distributing Government Securities

CFA® Exam Level 1, Fixed Income Securities

Demand and Supply Four Methods of Distributing Government Securities
This lesson is part 3 of 10 in the course Overview of Bond Sectors and Instruments

The central governments use one of the following four methods to distribute a new issue of securities:

Regular calendar auction / Dutch style auction

In this type of auction, there is a regular auction cycle. The winning bidders are allocated securities at yield (price) they bid. This is also called multiple-price method.

Regular calendar auction / Minimum-price offering system

This is also a regular auction but all the winning bidders are awarded securities at highest yield accepted by government (stop-out yield). This is also called single price method. For example, if the highest yield is 6.55%, and you had bid 6.52% you will be awarded securities at 6.55%. In the dutch style auction, you would have been awarded the securities at 6.52% (your bid). US government bonds are issued using this method.

Ad hoc auction 

Ad hoc auctions are announced by the government when the market conditions are favourable. Typically, the amount and maturity of issue are announced only at the time of the auction. Ad hoc auctions provide increased flexibility to raise funds, and also lessens the volatility which is high in regular auctions.

Tap system

Tap system is where the additional bonds of previously outstanding issues are auctioned. The government will periodically announce about these bonds.

Previous Lesson

‹ Credit Risk and Rating of Sovereign Debt

Next Lesson

Overview of U.S. Treasury Securities ›

Previous Lesson
Back to Course
Next Lesson

Primary Sidebar

In this Course

Course Home
Types of Markets in Economics
Demand Function and Demand Curve
Supply Function and Supply Curve
Shifts in Demand and Supply Curves
Aggregating Demand and Supply Curves and Concept of Equilibrium
Excess Demand and Excess Supply
Stable and Unstable Equilibrium
Types of Auctions
Four Methods of Distributing Government Securities
Consumer and Producer Surplus
Effects of Government Regulation on Demand and Supply
Price Elasticity of Demand
Income Elasticity of Demand
Cross Price Elasticity of Demand
Return to Demand and Supply

In this Course

  • Types of Bond Markets
  • Credit Risk and Rating of Sovereign Debt
  • Overview of U.S. Treasury Securities
  • Federal Agency Securities
  • Mortgage Pass-through Securities
  • Collateralized Mortgage Obligations and Prepayment Risk
  • Collateralized Mortgage Obligations (CMOs)
  • Overview of Municipal Bonds
  • Corporate Debt Securities and Rights of Bondholders

Latest Tutorials

    • Data Visualization with R
    • Derivatives with R
    • Machine Learning in Finance Using Python
    • Credit Risk Modelling in R
    • Quantitative Trading Strategies in R
    • Financial Time Series Analysis in R
    • VaR Mapping
    • Option Valuation
    • Financial Reporting Standards
    • Fraud
Facebook Group

Membership

Unlock full access to Finance Train and see the entire library of member-only content and resources.

Subscribe

Footer

Recent Posts

  • How to Improve your Financial Health
  • CFA® Exam Overview and Guidelines (Updated for 2021)
  • Changing Themes (Look and Feel) in ggplot2 in R
  • Coordinates in ggplot2 in R
  • Facets for ggplot2 Charts in R (Faceting Layer)

Products

  • Level I Authority for CFA® Exam
  • CFA Level I Practice Questions
  • CFA Level I Mock Exam
  • Level II Question Bank for CFA® Exam
  • PRM Exam 1 Practice Question Bank
  • All Products

Quick Links

  • Privacy Policy
  • Contact Us

CFA Institute does not endorse, promote or warrant the accuracy or quality of Finance Train. CFA® and Chartered Financial Analyst® are registered trademarks owned by CFA Institute.

Copyright © 2021 Finance Train. All rights reserved.

  • About Us
  • Privacy Policy
  • Contact Us