Discussion Paper

Measuring Treasury Market Depth

Abstract: A commonly used measure of market liquidity is market depth, which refers to the quantity of securities market participants are willing to buy or sell at particular prices. The market depth of U.S. Treasury securities, in particular, is assessed in many analyses of market functioning, including this Liberty Street Economics post on liquidity in 2023, this article on market functioning in March 2020, and this paper on liquidity after the Global Financial Crisis. In this post, we review the many measurement decisions that go into depth calculations and show that inferences about the evolution of Treasury market depth, and hence liquidity, are largely invariant with respect to these decisions.

Keywords: Treasury securities; liquidity; order book;

JEL Classification: G1;

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Bibliographic Information

Provider: Federal Reserve Bank of New York

Part of Series: Liberty Street Economics

Publication Date: 2024-02-12

Number: 20240212