Government bond auctions lead to profitable bidder underpricing in active markets.
Government debt securities are sold in auctions each week to minimize borrowing costs and market manipulation. The auctions aim to create a liquid secondary market for success. U.S. Treasury auctions are focused on, discussing the bidding process and important issues like private information and winner's curse. The market before and after auctions can lead to short squeezes, with bidder profits seen in pre- or post-auction markets.