bluejazzy

2. Explain the difference between Regular Auction Cycle/Multiple Price Method and Regular Auction Cycle/Single Price Method

Multiple Price - The winning bidders receive the bonds at the price they bid and earn the yield on the bonds corresponding to their price.

Single Price - ALL winning bidders receive the same yield, all pay the same price, which corresponds to the highest yield the government will accept.

for example, you and I are bidding on bonds being issued by say the US government. If you bid a price reflecting a yield of 5% and my price reflects a yield of 6%, under multiple price if you and I both were winning bidders I'd earn 6% on my bonds and you''d earn 5%. Under single price, say the government is willing to accept a price reflecting a 6% yield max, then if you and I were winning bidders we'd both get a 6% yielding bond.