How Does the Liquidity of New Treasury Securities Evolve?

Michael Fleming

No 20200826, Liberty Street Economics from Federal Reserve Bank of New York

Abstract: In a recent Liberty Street Economics post, we showed that the newly reintroduced 20-year bond trades less than other on-the-run Treasury securities and has similar liquidity to that of the more interest‑rate‑sensitive 30-year bond. Is it common for newly introduced securities to trade less and with higher transaction costs, and how does security trading behavior change over time? In this post, we look back at how liquidity evolved for earlier reintroductions of Treasury securities so as to gain insight into how liquidity might evolve for the new 20-year bond.

Keywords: Treasury; liquidity; reintroduction (search for similar items in EconPapers)
JEL-codes: G1 (search for similar items in EconPapers)
Date: 2020-08-26
New Economics Papers: this item is included in nep-fmk and nep-mst
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