This study of the market for Commonwealth government securities in Australia pays particular attention to the influence of interest rate expectations on demand. Attempts to estimate expectations with current and past information, including the use of a Box-Jenkins time series model are unsuccessful. An assumption that interest rate expectations are based on perfect foresight proves valuable in explaining the demand for government securities. The picture of the market which emerges is one of a private sector which acts on new information more quickly than it is incorporated in the official yield curve.
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