The Role of Economist Forecasts in Over-The-Counter Treasury Bond Markets

44 Pages Posted: 20 Nov 2019

See all articles by Robert James

Robert James

The University of Sydney

Elvis Jarnecic

The University of Sydney; Financial Research Network (FIRN)

Henry Leung

University of Sydney Business School; Financial Research Network (FIRN)

Date Written: November 8, 2019

Abstract

We examine the impact of economist forecasts on over-the-counter treasury bond trading and how participants with varied access to these forecasts respond. We find overnight interest rate forecasts are associated with increased treasury market trade volume and volatility, but not bond prices. Dealers at the forecasting economist’s institution sell but do not buy in response to forecasts that imply a fall and rise in bond price respectively. Dealers trade consistent with the forecasts of their own institution’s economists to reduce downside exposure but do not increase upside exposure in a uniform manner. Our results are consistent with expectations derived from theoretical models where agents heterogeneously interpret public information.

Keywords: Over-The-Counter markets, Market microstructure, Treasury Bond markets, Macroeconomic information, Research analyst forecasts

JEL Classification: E44, G12, G14, G21

Suggested Citation

James, Robert and Jarnecic, Elvis and Leung, Henry, The Role of Economist Forecasts in Over-The-Counter Treasury Bond Markets (November 8, 2019). Available at SSRN: https://ssrn.com/abstract=3483356 or http://dx.doi.org/10.2139/ssrn.3483356

Robert James (Contact Author)

The University of Sydney ( email )

University of Sydney
Sydney, NC NSW 2006
Australia

Elvis Jarnecic

The University of Sydney ( email )

University of Sydney
Sydney, NC NSW 2006
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Henry Leung

University of Sydney Business School ( email )

402, H69
The University of Sydney
Sydney, NSW 2006
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Register to save articles to
your library

Register

Paper statistics

Downloads
9
Abstract Views
135
PlumX Metrics