Predictable End-of-Month Treasury Returns

41 Pages Posted: 22 Aug 2019 Last revised: 3 Dec 2019

See all articles by Jonathan Hartley

Jonathan Hartley

Harvard University, Harvard Kennedy School (HKS), Students

Krista Schwarz

Board of Governors of the Federal Reserve System

Date Written: November 22, 2019

Abstract

We document a distinct pattern in the timing of excess returns on coupon Treasury securities. Average returns are positive and highly significant in the last few days of the month, and are not significantly different from zero at other times. A long Treasury position for just the last few days of each month gives a high annualized Sharpe ratio of around 1. We attribute this pattern to temporary spikes in investor demand for specific securities due to window dressing and portfolio rebalancing. We find evidence in quantities that aggregate insurer transactions contribute to the end-of-month price pattern. In particular life insurers are large net buyers of Treasury securities on benchmark index rebalancing dates.

Keywords: Treasury yields, anomalies, market efficiency, excess returns, month-end, portfolio rebalancing

JEL Classification: G12, G14

Suggested Citation

Hartley, Jonathan and Schwarz, Krista, Predictable End-of-Month Treasury Returns (November 22, 2019). Available at SSRN: https://ssrn.com/abstract=3440417 or http://dx.doi.org/10.2139/ssrn.3440417

Jonathan Hartley

Harvard University, Harvard Kennedy School (HKS), Students ( email )

Cambridge, MA
United States

Krista Schwarz (Contact Author)

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
538
Abstract Views
2,295
rank
59,887
PlumX Metrics