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Discussion Paper
Unlocking the Treasury Market through TRACE
Dobrev, Dobrislav; De Pooter, Michiel; Fleming, Michael J.; Johansson, Peter; Puglia, Michael; Jones, Collin; Keane, Frank M.; Brain, Doug; Reiderman, Liza; Rodrigues, Anthony P.; Shachar, Or (2018-09-28)
The U.S. Treasury market is widely regarded as the deepest and most liquid securities market in the world, playing a critical role in the global economy and in the Federal Reserve’s implementation of monetary policy. Despite the Treasury market’s importance, the official sector has historically had limited access to information on cash market transactions. This data gap was most acutely demonstrated in the investigation of the October 15, 2014, flash event in the Treasury market, as highlighted in the Joint Staff Report (JSR). Following the JSR, steps were taken to improve regulators’ ...
Liberty Street Economics , Paper 20180928b

Discussion Paper
The Indirect Costs of Lehman’s Bankruptcy
Sarkar, Asani; Denison, Erin; Fleming, Michael J. (2019-01-17)
In our previous post, we assessed losses to customers and clients from foregone opportunities after Lehman Brothers filed for bankruptcy in September 2008. In this post, we examine losses to Lehman and its investors in anticipation of bankruptcy. For example, if bankruptcy is expected, Lehman’s earnings may decline as customers close their accounts or certain securities (such as derivatives) to which Lehman is a counterparty may lose value. We estimate these losses by analyzing Lehman’s earnings and stock, bond, and credit default swap (CDS) prices.
Liberty Street Economics , Paper 20190117

Report
Price and size discovery in financial markets: evidence from the U.S. Treasury securities market
Nguyen, Giang; Fleming, Michael J. (2013)
We study the workup protocol, an important size discovery mechanism in the U.S. Treasury securities market. We find that shocks in workup order flow explain 6-8 percent of the variation of returns on benchmark notes and, across maturities, contribute 10 percent to the variation of the yield curve level factor. Information related to proprietary client order flow is more likely to show up in workup trades, whereas information derived from public announcements is more likely to come through pre-workup (or “lit”) trades. Our findings highlight how the nature of information affects the ...
Staff Reports , Paper 624

Discussion Paper
Treasury Market When-Issued Trading Activity
Fleming, Michael J.; Shachar, Or; Van Tassel, Peter (2020-11-30)
When the U.S. Treasury sells a new security, the security is announced to the public, auctioned a number of days later, and then issued sometime after that. When-issued (WI) trading refers to trading of the new security after the announcement but before issuance. Such trading promotes price discovery, which may reduce uncertainty at auction, potentially lowering government borrowing costs. Despite the importance of WI trading, and the advent of Treasury trading volume statistics from the Financial Industry Regulatory Authority (FINRA), little is known publicly about the level of WI activity. ...
Liberty Street Economics , Paper 20201130

Report
The Netting Efficiencies of Marketwide Central Clearing
Keane, Frank M.; Fleming, Michael J. (2021-04-01)
Market disruptions in response to the COVID pandemic spurred calls for the consideration of marketwide central clearing of Treasury securities, which might better enable dealers to intermediate large customer trading flows. We assess the netting efficiencies of increased central clearing using nonpublic Treasury TRACE transactions data. We find that central clearing of all outright trades would have lowered dealers’ daily gross settlement obligations by roughly $330 billion (60 percent) in the weeks preceding and following the market disruptions of March 2020, but nearly $800 billion (70 ...
Staff Reports , Paper 964

Report
An analysis of CDS transactions: implications for public reporting
Chen, Kathryn; Sarkar, Asani; Li, Ada; Fleming, Michael J.; Jackson, John (2011)
Ongoing regulatory reform efforts aim to make the over-the-counter derivatives market more transparent by introducing public reporting of transaction-level information, including price and volume of trades. However, to date there has been a scarcity of data on the structure of trading in this market. This paper analyzes three months of global credit default swap (CDS) transactions and presents findings on the market composition, trading dynamics, and level of standardization. We find that trading activity in the CDS market is relatively low, with a majority of reference entities for ...
Staff Reports , Paper 517

Report
Intraday Price Pressure and Order Flow Around U.S. Treasury Auctions
Liu, Weiling; Fleming, Michael J.; Nguyen, Giang (2026-03-01)
Using thirty-three years of intraday Treasury data, we provide the first high-frequency evidence on auction-day price pressure: yields rise in the hours before auction and reverse afterward. This pressure strengthens when dealers face tighter risk-bearing constraints and weakens when investor demand is stronger or more elastic. More importantly, net order flow dominates in explaining the pressure, providing the first direct evidence that trading transmits dealer constraints into prices. Despite concerns about dealer capacity amid rapid federal debt growth, price pressure has not increased in ...
Staff Reports , Paper 1188

Discussion Paper
Dealers’ Positions and the Auction Cycle
Jones, Collin; Fleming, Michael J. (2015-10-14)
The aftermath of the financial crisis and changes in technology and regulation have spurred a spirited discussion of dealers? evolving role in financial markets. One such role is to buy securities at auction and sell them off to investors over time. We assess this function using data on primary dealers? positions in benchmark Treasury securities, released by the New York Fed since April 2013 and described in this earlier Liberty Street Economics post.
Liberty Street Economics , Paper 20151014

Discussion Paper
Treasury Trading at the Close
Dyer, Henry; Fleming, Michael J.; Shachar, Or (2026-09-22)
In past work, we showed that trading in U.S. Treasury securities is becoming increasingly concentrated on the last trading day of each month. In this post, we show that trading is also becoming more concentrated around the designated pricing, or “strike,” times for fixed-income indexes. The concentration is especially pronounced on month-end trading days. We also document a marked shift in trading activity from around 3 p.m. (ET) to around 4 p.m. after a major fixed-income index provider moved its strike time from 3 p.m. to 4 p.m. in January 2021.
Liberty Street Economics , Paper 20260922

Report
Anomalous bidding in short-term Treasury bill auctions
Garbade, Kenneth D.; Keane, Frank M.; Fleming, Michael J. (2004-05-01)
We show that Treasury bill auction procedures create classes of price-equivalent discount rates for bills with fewer than seventy-two days to maturity. We argue that it is inefficient for market participants to bid at a discount rate that is not the minimum rate in its class. The inefficiency of bidding at a rate other than the minimum is related to a quantity shortfall rather than an unexploited profit opportunity. Auction results for weekly offerings of four-week bills and occasional offerings of cash management bills show that market participants frequently bid at inefficient rates. ...
Staff Reports , Paper 184

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