The Microstructure of the TIPS Market

33 Pages Posted: 21 Dec 2009

See all articles by Michael J. Fleming

Michael J. Fleming

Federal Reserve Bank of New York

Neel Krishnan

Federal Reserve Bank of New York

Date Written: December 2009

Abstract

We characterize the microstructure of the market for Treasury inflation-protected securities (TIPS) using novel tick data from the interdealer market. We find a marked difference in trading activity between on-the-run and off-the-run securities, as in the nominal Treasury securities market. We find little difference in bid-ask spreads or quoted depth between on-the-run and off-the-run securities, in contrast to the nominal market, but we do find a sharp difference in the incidence of posted quotes. Intraday activity differs strikingly from the nominal market, with activity peaking in the mid-to-late morning. Announcement effects also differ from the nominal market, with auction results and consumer price index announcements eliciting particularly sharp increases in trading activity.

Keywords: Treasury inflation-protected securities, liquidity, seasonality, announcements

JEL Classification: G14

Suggested Citation

Fleming, Michael J. and Krishnan, Neel, The Microstructure of the TIPS Market (December 2009). FRB of New York Staff Report No. 414. Available at SSRN: https://ssrn.com/abstract=1525617 or http://dx.doi.org/10.2139/ssrn.1525617

Michael J. Fleming (Contact Author)

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States
212-720-6372 (Phone)
212-720-1582 (Fax)

HOME PAGE: http://www.newyorkfed.org/research/economists/fleming/

Neel Krishnan

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States
917.863.8320 (Phone)

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