Indirect bidder is the bidder that does not purchase securities directly from the US treasury department and prefers to buy treasury securities through a third party or an intermediary such as bank or a broker or a dealer. Indirect bidders include financial institutions that are national as well as foreign institutions such as central bank and other foreign banks. The indirect bidder in association with foreign bodies can also use internal money managers to purchase treasury securities through auction. These money managers include primary monetary dealers.
The indirect bidding process is done via competitive and non-competitive strategies. In competitive bid the indirect bidder has to define a specific return that he wants over the securities while the highest bidder in the competition wins the bid. On the other hand in an non-competitive bid the indirect bidder has no need to specify the return he wants to enjoy on the securities however it accepts all the bids from all the bidders and rate them on their respective competence and accepts the one that offers highest return. This means that the non-competitive bid is selected on the basis of highest amount of the yield.
At the end of the auction the treasury department announces the dollar value of the securities that are purchased by the investors and sold by the US treasury department.
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