Dutch Auction

The U.S. Treasury (and other countries) uses a Dutch auction to sell securities. This workbook contains two examples of how a Dutch auction might work. One assumes the bids are on a yield basis or discount rate basis, like Treasury bills. The other sheet is the same except it assumes bids are made on a price basis.

The difference between a standard auction and a Dutch auction is the standard auction  winners are the ones that pay the highest prices, while the Dutch auction calculates the highest prices at which all shares will be sold and all winners pay the lowest price, but on a pro rata basis. In other words, with a Dutch auction you have little chance of getting all the securities you bid for. I used the bids by price sheet for the example below. The bidders have been given a code number. Follow the callout steps numbers 1 and 2., and the sheet will calculate the pro rata amounts each winner will receive, and all winners will get the lowest price.  The other sheet works the same way, but with yields.

In addition, because bidders can make multiple bids, the allocation by bidder is also given:


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Downloads Written in Excel 2013

Don Pistulka
Don Pistulka

Retired Credit Union CFO - Finance
Background: over 40 years in investments, asset/Liability management, banking, securities trader.
Worked for: California Credit Union, WesCorp, CalFed S&L, Crocker Bank, Carroll McEntee, Federal Home Loan Bank Board (D.C.), Western Asset Management, Security Pacific National Bank.

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