Auctions of Public Debt Securities by the Central Bank of Brazil: A Study of the Factors of the Dispersion of Proposals for BBCs

Vol. 20 No. 4 (2000)

Oct-Dec / 2000
Published October 1, 2000
PDF-Portuguese (Português (Brasil))
PDF-Portuguese (Português (Brasil))

How to Cite

Garcia, Márcio G. P., and Leonardo B. Rezende. 2000. “Auctions of Public Debt Securities by the Central Bank of Brazil: A Study of the Factors of the Dispersion of Proposals for BBCs”. Brazilian Journal of Political Economy 20 (4):369-86. https://doi.org/10.1590/0101-31572000-1215.

Auctions of Public Debt Securities by the Central Bank of Brazil: A Study of the Factors of the Dispersion of Proposals for BBCs

Márcio G. P. Garcia
Professor do Departamento de Economia da Pontifícia Universidade Católica do Rio de Janeiro - PUC-Rio, Rio de Janeiro/RJ, Brasil.
Leonardo B. Rezende
Aluno de Doutorado do Departamento de Economia da Universidade de Stanford, EUA.
Brazilian Journal of Political Economy, Vol. 20 No. 4 (2000), Oct-Dec / 2000, Pages 369-386

Abstract

We aim at obtaining a simple econometric model that allows us to build a confidence
interval for the dispersion of the bids made by financial institutions at the central bank
weekly auctions of short-term securities in Brazil. Under competitive conditions (e. g., no coalition
between a few financial institutions) we assume that the bids’ dispersion is associated
with the volatility of the daily interest rate futures prices and the daily interest rates that had prevailed during the days prior to the auction. Based on that assumption, our model succeeds
in separating the two auctions with extremely high volatility. ln one of them, the high
dispersion could be predicted using the other interest rate markets’ data; in the other the dispersion
fell outside the confidence interval for the predicted dispersion. This can be used as
empirical evidence of an attempt to comer the market that has indeed occurred at that date.

JEL Classification: H63; E58.


Keywords: Public debt public debt structure