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Working Paper
Price Pressure and Price Discovery in the Term Structure of Interest Rates
We study the price pressure and price discovery effects in the U.S. Treasury market by using a term structure model. Our model decomposes yield curve shifts into two components: a virtually permanent change related to order flow and a transitory, price pressure effect due to dealer inventories. We find strong evidence that net dealer Treasury inventories has impact on the yield curve. Cash Treasury instruments in inventory have a larger impact on yields than futures contracts, suggesting that cash and futures inventories are not perfect substitutes. Price discovery in the level of interest ...
Working Paper
Market Liquidity in Treasury Futures Market During March 2020
We study the behavior of liquidity providers and liquidity consumers in the 10-year U.S. Treasury futures market during the height of the COVID-19 shock in March 2020, a period of market turmoil when demand for liquidity was high. In March 2020, PTFs reduced their volume of liquidity providing trades as a share of total trading volume. However, they still accounted for the lion share of total liquidity provision and their liquidity provision improved market liquidity. In contrast, dealers (banks and non-banks) increased their volume of liquidity providing trades as a share of total trading ...