Skip to content

CFA Level I · CFA Level I Exam · Fixed-Income Issuance and Trading

A government sells new bonds through a single-price auction in which bidders submit yields. Bids accepted, in ascending order of yield, are 4.10% for 300 million, 4.15% for 400 million, and 4.20% for 300 million. The government is offering 1,000 million, and all three bids are needed to fill the issue. In a single-price (Dutch) auction, all successful bidders will most likely receive bonds at a yield of:

All successful bidders receive bonds at 4.20%. In a single-price auction, every winner pays the stop-out yield, which is the highest yield needed to fill the issue. Since all three bids are required, the highest accepted yield of 4.20% applies.

  1. A4.10%
  2. B4.15%
  3. C4.20%Correct

Explanation

In a single-price auction, bonds are allocated to the lowest-yield bids first until the issue is filled, and every successful bidder is awarded bonds at the stop-out (highest accepted) yield. Here all three bids are needed, so the highest accepted yield, 4.20%, applies to everyone. 4.10% would apply only in a multiple-price auction to that bidder.

Did you get it right without looking?

One question tells you little. A timed set on Fixed-Income Issuance and Trading shows your real accuracy, how long you take and where you lose marks.

Practise Fixed-Income Issuance and TradingFree diagnostic mock

More Fixed-Income Issuance and Trading questions