Private Information Flow and Price Discovery in the U.S. Treasury Market

43 Pages Posted: 1 Sep 2012 Last revised: 29 Dec 2016

See all articles by George J. Jiang

George J. Jiang

Washington State University

Ingrid Lo

Bank of Canada

Date Written: July 2014

Abstract

Using intraday data, we identify the intensity of private information flow in the U.S. Treasury market. Our results show that the intensity of private information flow is highly correlated with public information shocks and higher for longer maturity bonds. More importantly, we find that bond price changes associated with high intensity of private information flow tend to be persistent, whereas those associated with low intensity of private information flow are more likely reversed. While public information and private information are the main determinants of bond price variations on days with news announcements, private information and liquidity shocks are important determinants of bond price variations on days with no significant events. Finally, we show that the depth of limit order book is inversely related to the intensity of private information flow. Nevertheless, informed dealers do not seem to use hidden orders to disguise their trading intentions.

Keywords: Private information flow; Public information shocks; Price discovery; Order flow impact; Bond return volatility; Depth of limit order book

JEL Classification: G12; G14

Suggested Citation

Jiang, George and Lo, Ingrid, Private Information Flow and Price Discovery in the U.S. Treasury Market (July 2014). Available at SSRN: https://ssrn.com/abstract=2139702 or http://dx.doi.org/10.2139/ssrn.2139702

George Jiang (Contact Author)

Washington State University ( email )

Department of Finance and Management Science
Carson College of Business
Pullman, WA 99-4746164
United States
509-3354474 (Phone)

HOME PAGE: http://directory.business.wsu.edu/bio.html?username=george.jiang

Ingrid Lo

Bank of Canada ( email )

234 Wellington Street
Ottawa, Ontario K1A 0G9
Canada

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