Report

Price formation and liquidity in the U.S. Treasury market: evidence from intraday patterns around announcements


Abstract: We identify striking adjustment patterns for price volatility, trading volume, and bid-ask spreads in the U.S. Treasury market when public information arrives. Using newly available high-frequency data, we find a notable lack of trading volume upon a major announcement when prices are most volatile. The bid-ask spread widens dramatically with price volatility and narrows just as dramatically with trading volume. Trading volume surges only after an appreciable lag following the announcement. High levels of price volatility and trading volume then persist, with volume persisting somewhat longer.

Keywords: Government securities; Treasury bills; Treasury bonds; Open market operations;

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Provider: Federal Reserve Bank of New York

Part of Series: Staff Reports

Publication Date: 1997

Number: 27