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Keywords:Treasury market 

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

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

Working Paper
The Effects of Volatility on Liquidity in the Treasury Market

We study the relationship between volatility and liquidity in the market for on-the-run Treasury securities using a novel framework for quantifying price impact. We show that at times of relatively low volatility, marginal trades that go with the flow of existing trades tend to have a smaller price impact than trades that go against the flow. However, this difference tends to diminish at times of high volatility, indicating that the perceived information content of going against the flow is less when volatility is high. We also show that market participants executing trades aggressively using ...
Finance and Economics Discussion Series , Paper 2023-028

Report
Financial market implications of the federal debt paydown

U.S. Treasury securities fill several crucial roles in financial markets: they are a risk-free benchmark, a reference and hedging benchmark, and a reserve asset to the Federal Reserve and other financial institutions. Many of the features that make the Treasury market an attractive benchmark and reserve asset are likely to be adversely affected by the paydown of the federal debt, and recent developments suggest that this may be happening already. Market participants are responding by moving away from Treasuries as a reference and hedging benchmark toward agency debt securities, corporate debt ...
Staff Reports , Paper 120

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

Working Paper
The Effect of Primary Dealer Constraints on Intermediation in the Treasury Market

Using confidential microdata, we show that shocks to primary dealers’ risk-bearing constraints have significant effects on the US Treasury securities market. In response to tighter constraints, dealers reduce their Treasury positions, triggering a reduction in aggregate turnover and an increase in bid–ask spreads. These effects are more pronounced in securities that contribute more to the utilization of risk constraints. The impaired intermediation also affects Treasury yields, amplifying the yield response to net demand shifts. Moreover, tighter dealer constraints weaken Treasury auction ...
Working Papers , Paper 24-7

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

Speech
Opening Remarks

Remarks at 2023 U.S. Treasury Market Conference, Federal Reserve Bank of New York, New York City.
Speech

Report
Dealer Capacity and U.S. Treasury Market Functionality

We show a significant loss in U.S. Treasury market functionality when intensive use of dealer balance sheets is needed to intermediate bond markets, as in March 2020. Although yield volatility explains most of the variation in Treasury market liquidity over time, when dealer balance sheet utilization reaches sufficiently high levels, liquidity is much worse than predicted by yield volatility alone. This is consistent with the existence of occasionally binding constraints on the intermediation capacity of bond markets.
Staff Reports , Paper 1070

Report
Liquidity and volatility in the U.S. treasury market

We model the joint dynamics of intraday liquidity, volume, and volatility in the U.S. Treasury market, especially through the 2007-09 financial crisis and around important economic announcements. Using various specifications based on Bauwens and Giot?s (2000) Log- ACD(1,1) model, we find that liquidity, volume, and volatility are highly persistent, with volatility having a lower short-term persistence than the other two. Market liquidity and volume are important to explaining volatility dynamics but not vice versa. In addition, market dynamics change during the financial crisis, with all ...
Staff Reports , Paper 590

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