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Keywords:Treasury market 

Report
The microstructure of a U.S. Treasury ECN: the BrokerTec platform

We assess the microstructure of the U.S. Treasury securities market following its migration to electronic trading. We model price discovery using a vector autoregression model of price and order flow. We show that both trades and limit orders affect price dynamics, suggesting that traders also choose limit orders to exploit their information. Moreover, while limit orders have smaller price impact, their greater variation contributes more to the variance of price updates. Lastly, we find increased price impact of trades and especially limit orders following major announcements (such as FOMC ...
Staff Reports , Paper 381

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 ...
Finance and Economics Discussion Series , Paper 2018-065

Report
How do treasury dealers manage their positions?

Using thirty-one years of data on U.S. Treasury dealer positions from 1990 to 2020, we find evidence of a significant role for dealers in the intertemporal intermediation of new Treasury security supply. Dealers regularly take into inventory a large share of Treasury issuance so that dealer positions significantly increase during auction weeks. These inventory increases are only partially offset in adjacent weeks and are not significantly hedged with futures. Dealers seem to be compensated for the risk associated with these inventory changes by means of price appreciation in the subsequent ...
Staff Reports , Paper 299

Discussion Paper
Treasury Market When-Issued Trading Activity

When the U.S. Treasury sells a new security, the security is announced to the public, auctioned a number of days later, and then issued sometime after that. When-issued (WI) trading refers to trading of the new security after the announcement but before issuance. Such trading promotes price discovery, which may reduce uncertainty at auction, potentially lowering government borrowing costs. Despite the importance of WI trading, and the advent of Treasury trading volume statistics from the Financial Industry Regulatory Authority (FINRA), little is known publicly about the level of WI activity. ...
Liberty Street Economics , Paper 20201130

Speech
Transcript of Lorie Logan on the Macro Musings Podcast

A closer look at monetary policy operations, the Fed’s new Standing Repo Facility, and the future of the Fed’s balance sheet.
Speech

Speech
Federal Reserve Asset Purchases: The Pandemic Response and Considerations Ahead

Remarks at New York University’s Stern School of Business (delivered via videoconference)As prepared for delivery.
Speech

Speech
Gradual and predictable: reducing the size of the Federal Reserve’s balance sheet: remarks at SUERF – The European Money and Finance Forum, New York City

Remarks at SUERF ? The European Money and Finance Forum, New York City.
Speech , Paper 257

Discussion Paper
Assessing the Price Impact of Treasury Market Workups

The price impact of a trade derives largely from its information content. The “workup” mechanism, a trading protocol used in the U.S. Treasury securities market, is designed to mitigate the instantaneous price impact of a trade by allowing market participants to trade additional quantities of a security after a buyer and seller first agree on its price. Nevertheless, workup trades are not necessarily free of information. In this post, we assess the role of workups in price discovery, following our recent paper in the Review of Asset Pricing Studies (an earlier version of which was ...
Liberty Street Economics , Paper 20190306c

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 ...
Liberty Street Economics , Paper 20181205

Discussion Paper
Bank Supervisory Goals versus Monetary Policy Implementation

The global financial crisis of 2007–09 revealed substantial weaknesses in large banks' capital adequacy and liquidity. Bank regulators responded with a variety of prudential measures intended to strengthen both. However, these prudential measures resulted in conflicts with the implementation of monetary policy that helped alter the way the Federal Reserve conducts monetary policy. I review three such conflicts: regulation inhibiting interest on excess reserves arbitrage starting in 2008, regulation inhibiting banks' operations in the repo market in 2019, and regulation inhibiting their ...
Policy Hub , Paper 2021-03

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