Information Shares in the U.S. Treasury Market

FRB of St. Louis Working Paper No. 2005-070E

33 Pages Posted: 3 Oct 2007

See all articles by Bruce Mizrach

Bruce Mizrach

Rutgers University, Department of Economics

Christopher J. Neely

Federal Reserve Bank of St. Louis - Research Division

Date Written: October 2007

Abstract

This paper characterizes the tatonnement of high-frequency returns from U.S. Treasury spot and futures markets. In particular, we highlight the previously neglected role of the futures markets in price discovery. The highest futures market shares are in the longest maturities. The estimates of 5-year and 10-year GovPX spot market information shares typically fail to reach 50% from 1999 on. The GovPX information shares for the 2-year contract are higher than those of the 5- and 10-year maturities but also decline after 1998. Standard liquidity measures, including the relative bid-ask spreads, number of trades, and realized volatility are statistically significant and explain up to 21% of daily information shares. The futures market gains information share in about 1/4 of the events where public information is released, but days of macroeconomic announcements rarely explain information shares independently of their effects on liquidity.

Keywords: information shares, Treasury market, microstructure, GovPX, futures, price discovery

JEL Classification: G14, G12, D4, C32

Suggested Citation

Mizrach, Bruce and Neely, Christopher J., Information Shares in the U.S. Treasury Market (October 2007). FRB of St. Louis Working Paper No. 2005-070E, Available at SSRN: https://ssrn.com/abstract=1018464 or http://dx.doi.org/10.2139/ssrn.1018464

Bruce Mizrach (Contact Author)

Rutgers University, Department of Economics ( email )

75 Hamilton Street
New Brunswick, NJ 08901
United States
(848) 932-8636 (Phone)
(732) 932-7416 (Fax)

HOME PAGE: http://snde.rutgers.edu/

Christopher J. Neely

Federal Reserve Bank of St. Louis - Research Division ( email )

411 Locust St
Saint Louis, MO 63011
United States
314-444-8568 (Phone)
314-444-8731 (Fax)

HOME PAGE: http://www.stls.frb.org/research/econ/cneely/

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