Intraday Pattern in the US Corporate Bond Market

Abstract

In this paper, we employ the Trace Enhanced database to investigate the intraday pattern in the US corporate bond market. We find that there is intraday reversal in the cross-sections of bond returns based on half-hour intervals. Regardless of the volume, order imbalance, ratings, and liquidity, the pattern only changes its strength. Specifically, high volume, high liquidity, and low order imbalance enhance this pattern. Moreover, we also identify the daily return continuation effect lasting for at least 4 days based on the first half-hour return. The overreaction to the security-specific component of bond returns may primarily explain this phenomenon while common risk factors only change its degree.

Keywords: Corporate bond, cross-section returns, intraday reversal, daily return continuation effect

JEL Classification: C22, C58, G15