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Discussion Paper
Price Impact of Trades and Orders in the U.S. Treasury Securities Market
It’s long been known that asset prices respond not only to public information, such as macroeconomic announcements, but also to private information revealed through trading. More recently, with the growth of high-frequency trading, academics have argued that limit orders—orders to buy or sell a security at a specific price or better—also contain information. In this post, we examine the information content of trades and limit orders in the U.S. Treasury securities market, following this paper, recently published in the Journal of Financial Markets and earlier as a New York Fed staff ...
Journal Article
The Stock Market's Wild Ride
Quick action by the Fed to smooth the functioning of financial markets appears to have encouraged investors and stopped the historic downturn in the stock market.
Working Paper
The microstructure of the U.S. treasury market
This article discusses the microstructure of the U.S. Treasury securities market. Treasury securities are nominally riskless debt instruments issued by the U.S. government. Microstructural analysis is a field of economics/finance that examines the roles played by heterogenous agents, institutional detail, and asymmetric information in the trading process. The article describes types of Treasury issues; stages of the Treasury market; the major players, including the role of the Federal Reserve Bank of New York and the interdealer brokers; the structure of both the spot and futures markets; the ...
Journal Article
The transition to electronic communications networks in the secondary treasury market
This article reviews the history of the recent shift to electronic trading in equity, foreign exchange, and fixed-income markets. The authors analyze a new data set: the eSpeed electronic Treasury network. They contrast the market microstructure of the eSpeed trading platform with the traditional voice-assisted networks that report through GovPX. The electronic market (eSpeed) has greater volume, smaller spreads, and a lower estimated trade impact than the voice market (GovPX). ; Appeared earlier as Working Paper 2006-012
Report
Alternative Trading Systems in the Corporate Bond Market
We investigate the trading of corporate bonds on alternative trading system (ATS) platforms. We draw a key distinction between request-for-quote (RFQ) and electronic communication network (ECN) trading protocols, which balance investors’ preference for immediacy and anonymity. Trades on ATS platforms are smaller and more likely to involve investment-grade bonds. Trades on ATS platforms are more probable for older, less actively traded bonds from smaller issues and for bonds traded by more dealers where inventory is high. Moreover, dealer participation on ATS platforms is associated with ...
Working Paper
Information shares in the U.S. treasury market
This paper is the first to characterize the tatonnement of high-frequency returns from U.S. Treasury spot and futures markets. In particular, we highlight the previously neglected role of the futures markets in price discovery. The lower-bound estimate of bivariate information shares for 30-year Treasury futures typically exceeds 50% from 1998 on. Standard liquidity measures, including the proportion of trades and relative bid-ask spreads, explain daily information shares. These conclusions still hold when one controls for days of macroeconomic announcements. Finally, a 5-dimensional ...
Journal Article
Federal Reserve System International Facilities
Fed lending to foreign central banks for them to provide emergency lending aids the U.S. economy by stabilizing international financial markets.
Journal Article
Secondary Market Corporate Credit Facility Supports Main Street
Fed policy appears to have assisted the corporate credit market during a period of unusually high risk and fire-sale prices.