The Impact of FOMC Announcements on Return and Volatility Spillovers in Us Treasury Futures

Abstract

We examine the impact of Federal Open Market Committee (FOMC) announcements on the intraday return and volatility of various maturities of U.S. Treasury futures. Our analysis unveils contemporaneous connections in returns and volatilities across all futures, amplified post-FOMC announcements, except for 30-year futures. FOMC announcements strengthen the intertemporal volatility transmitter role of 5-year futures, primarily because of its high liquidity. Forward guidance enhances this role for 2-year and 5-year futures, while large-scale asset purchases trigger volatility transmission from 10-year futures. These results offer valuable insights for market participants seeking to comprehend information transmission and aggregation dynamics among Treasury futures in response to FOMC announcements.

Keywords: US Treasury futures, Federal Open Market Committee (FOMC), Federal funds rate, Price discovery.