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Price formation and liquidity in the U.S. treasuries market: evidence from intraday patterns around announcements


Abstract: We find striking intraday adjustment patterns for price volatility, trading volume, and bid-ask spreads in the U.S. Treasuries market around the time of macroeconomic announcements. The patterns suggest certain hypotheses about price formation and liquidity provision in multiple-dealer markets. These hypotheses assign new importance to public information, heterogeneous views, sluggish price discovery, traditional inventory-control behavior by market makers, and liquidity traders who react with a lag to price changes.

Keywords: Government securities; Open market operations;

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Provider: Federal Reserve Bank of New York

Part of Series: Research Paper

Publication Date: 1996

Number: 9633