This paper examines the results of 93 discriminatory German Treasury auctions between 1998 and 2002. German Treasury Auctions differ in a qualitative manner from auctions in other countries: The bidders are allowed to submit both competitive and non-competitive bids without quantity restrictions. The seller has considerable discretion in deciding how to allocate the securities. In particular, (s)he can determine after the submission of bids the amount to set aside for sales in the secondary market and the extent to which non-competitive bids are filled. This paper documents the seller’s use of discretion and its influence on auction outcomes and bidding strategies. The evidence suggests that the seller uses its discretion frequently and substantially. Allocations to competitive bidders amount only to about 50% of the total allocations in German Treasury auctions, whereas the rest is allocated to non-competitive bidders and secondary market operations. The seller does not maximize revenues in a given auction, but sets the auction price on average equal to the market price. Neither the seller nor the bidders make profits in German auctions on average, while the bidders’ strategies reflect the uncertainty created by the seller’s discretion. The paper extends and tests the multi-unit auction model by Lengwiler (1999). The empirical evidence is consistent with the implication that the seller chooses the marketclearing price based on the its marginal cost, which is the market price on the auction day, rather than on the submitted demand. The paper confirms and extends the empirical evidence from other countries that investors incorporate the uncertainty in the markets into their bidding decisions. When the uncertainty in the markets increase, more potential bidders abstain from bidding, bidders submit relatively more demand in the non-competitive tender, and competitive bidders demand less, bid at lower prices, and increase the dispersion of their bids.