Intraday Price Pressure and Order Flow Around U.S. Treasury Auctions

Fleming, Michael J.; Liu, Weiling; Nguyen, Giang

doi:10.59576/sr.1188

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Intraday Price Pressure and Order Flow Around U.S. Treasury Auctions

Abstract: 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 recent years, partly because non-dealer participants now absorb more auction supply and ease dealers’ intermediation burden.

JEL Classification: G12; G14; E43; H63;

https://doi.org/10.59576/sr.1188