I did ask this question to TreasuryDirect, but received no answer.

Most weeks the U.S. Government issues Treasury bond products, for terms as short as four weeks. You receive the face value but pay less than the face value. The price is determined though auctions.

You can bid competitively (I will lend you $998 if you pay me $1000 in a month) or non-competitively (I want $1000 in a month and I will pay you whatever the prevailing rate is, which will always be lower than the face value).

The auction happens several days before the bonds are actually issued.

The Treasury has confirmed to me that if one doesn't have the money in the account linked to the website, one simply does not receive the bonds.

The bids, however, have already affected the prevailing price.

What happens when some patriot, wanting to improve the terms on which the Government borrows money, bids billions of dollars in both non-competitive and low price competitive orders, lowering the margin for everyone else?

1 Answer 1


It would be a violation of 18 USC 1001, which is the law against making false statements to the federal government. Paul Mozer, who was a Salomon Brothers trader, received a four month sentence for doing something along those lines in 1994. Bidding on something implies an intent to pay for the thing, which in this case is a falsehood: in so doing, one "falsifies, conceals, or covers up by any trick, scheme, or device a material fact" (that you don't intend to pay for the thing).

  • Also, not just anyone is allowed to participate in a bid to purchase Treasury bonds at auction. You have to sign up with the Treasury to do so, even though it isn't a very rigorous process to qualify for (you have to do things like provide contact information, a direct withdrawal from a bank account #s and a taxpayer ID). I am pretty sure that you also have to affirm under penalty of perjury that you believe that are able to buy what you are bidding for with good funds. But, if you engage in misconduct once, you would be barred by the Treasury from participating in the auction in the future.
    – ohwilleke
    Feb 7, 2019 at 20:57
  • This also probably violates the '34 Act prohibition on "market manipulation."
    – ohwilleke
    Feb 7, 2019 at 21:01

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