IMF Working Papers

Bidding Behavior in Italian Treasury Auctions: The Role of Top-ups

By Daniela Marchettini

April 4, 2025

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Daniela Marchettini. "Bidding Behavior in Italian Treasury Auctions: The Role of Top-ups", IMF Working Papers 2025, 069 (2025), accessed May 14, 2025, https://doi.org/10.5089/9798229004183.001

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

In response to rising global government debt, sovereign debt management offices (DMOs) are increasingly refining their issuance methods to optimize investor engagement and minimize borrowing costs. This paper evaluates the effectiveness of a two-stage Treasury auction design that incorporates a supplementary non-competitive 'top-up' component, assessing its potential to enhance bidder performance. Utilizing detailed microdata from Italian Treasury bill auctions and employing a Difference-in-Differences analytical framework, the paper investigates how these supplementary top-up auctions influence bidder behavior in terms of requested quantities and offered prices during the main competitive auction. The analysis demonstrates that the introduction of top-ups promotes more aggressive bidding, especially among marginal bids, leading to higher cumulative bid values in the primary competitive phase. These findings suggest that top-up auctions can effectively boost auction coverage and may contribute to lower government borrowing costs by strategically shaping bidder incentives and behaviors.

Subject: Bonds, Financial institutions, Government debt management, Government securities, Public financial management (PFM), Securities, Treasury bills and bonds

Keywords: Auction coverage, Bonds, Clearing price in Treasury auctions, Debt Management., Global, Government debt management, Government securities, Price bid, Primary Sovereign Debt Market, Securities, Single-price auction, Topups, Treasury Auctions, Treasury bill auction, Treasury bills and bonds, Uniform auction format

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