Time-Varying Price Discovery in the European Treasury Markets

Posted: 16 Jun 2008 Last revised: 1 Nov 2013

See all articles by Minh Nguyen

Minh Nguyen

Newcastle University Business School

Alfonso Dufour

ICMA Centre, Henley Business School, University of Reading

Date Written: May 15, 2013

Abstract

We study the price discovery process in Euro area government bond markets. We analyze the most active German, French, Italian and Spanish sovereign securities traded on the MTS electronic inter-dealer markets for various maturity buckets. We find that the level of contribution to the price discovery process by the bonds of a certain country changes within each maturity bucket. The French market takes price leadership at the short maturity while the German market is more informative at the medium and long maturities. Importantly, we find that the speed of the yield adjustment to the long-term equilibrium relationship among yields varies over time and can be affected by certain explanatory variables. Our results show that economic news announcements reinforce information contributions to the common efficient interest rate and, consequently, lead to larger and faster yield adjustments.

Keywords: Price Discovery, Trading Intensity, Duration, Bond Markets

JEL Classification: G12, G14, F36

Suggested Citation

Nguyen, Minh and Dufour, Alfonso, Time-Varying Price Discovery in the European Treasury Markets (May 15, 2013). Available at SSRN: https://ssrn.com/abstract=1144744 or http://dx.doi.org/10.2139/ssrn.1144744

Minh Nguyen (Contact Author)

Newcastle University Business School ( email )

Newcastle upon Tyne, NE1 7RU
United Kingdom

Alfonso Dufour

ICMA Centre, Henley Business School, University of Reading ( email )

Whiteknights Park
P.O. Box 242
Reading RG6 6BA
United Kingdom

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