Price Formation and Liquidity in the U.S. Treasury Market: Evidence from Intraday Patterns Around Announcements

Fleming, Michael J.; Remolona, Eli M.

doi:10.2139/ssrn.943513

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Price Formation and Liquidity in the U.S. Treasury Market: Evidence from Intraday Patterns Around Announcements

FRB of New York Staff Report No. 27

55 Pages Posted: 11 Nov 2006

See all articles by Michael J. Fleming

Eli M. Remolona

Bank for International Settlements (BIS) - Monetary and Economic Department

There are 2 versions of this paper

Date Written: July 1997

Abstract

We identify striking adjustment patterns for price volatility, trading volume, and bid-ask spreads in the U.S. Treasury market when public information arrives. Using newly available high-frequency data, we find a notable lack of trading volume upon a major announcement when prices are most volatile. The bid-ask spread widens dramatically with price volatility and narrows just as dramatically with trading volume. Trading volume surges only after an appreciable lag following the announcement. High levels of price volatility and trading volume then persist, with volume persisting somewhat longer.

JEL Classification: G14

Suggested Citation: Suggested Citation

Fleming, Michael J. and Remolona, Eli M., Price Formation and Liquidity in the U.S. Treasury Market: Evidence from Intraday Patterns Around Announcements (July 1997). FRB of New York Staff Report No. 27, Available at SSRN: https://ssrn.com/abstract=943513 or http://dx.doi.org/10.2139/ssrn.943513