Leveraging an institutional feature that Treasury auctions of different maturities are often held simultaneously, we propose a method for estimating demand systems for Treasuries, avoiding the usual endogeneity issues in demand estimation. We implement our method using bidding data from Canadian T-bill auctions, and find that different types of T-bills are only weak substitutes, despite their cash-like nature. We provide a micro-foundation of demand in the primary market to explain this finding, and illustrate how demand elasticities, together with the auction format, determine how to allocate debt on a given day across maturities.
financial crisis heterogeneous time preferences front- running