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The literature on debt management has devoted little attention to the practice of floating debt using'subscription issues', ie, at a fixed price and quantity, even if this practice is rather common in many countries as an alternative to placement techniques that involve competitive bidding. 1 The focus of this paper is on this marketing strategy for a public debt manager facing uncertain market conditions. In particular, we consider a framework where government bonds are the only investment opportunity; the debt manager, therefore, holds monopoly power over the market for financial assets and solves his profitmaximisation problem by setting the price of the bonds in the face of an unobservable demand function.

Intertemporal economic decisions under uncertainty can be modelled as multiperiod control problems: when the parameters of the true model are unknown, as in our case, a tradeoff typically arises between …