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Why Governments Borrow Trillions at Auction Like Clockwork
Episode 35 of The Fiscal Policy Podcast dives into the machinery of government debt auctions. Lucas and Luna explain how the U.S. Treasury sells over $5 trillion in securities every year, why it uses a single-price auction format, and what happens when a bidder tries to bid a penny. They walk through a real example: the October 2024 10-year note reopening that had a bid-to-cover ratio of 2.6. Luna challenges whether the process is rigged for big banks, and Lucas breaks down the role of primary dealers, the Treasury's parallel offering schedule, and why the system hasn't changed…
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