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Liquidity measures throughout the lifetime of the U.S. Treasury bond

Antonio Díaz and Ana Escribano

Journal of Financial Markets, 2017, vol. 33, issue C, 42-74

Abstract: We examine the price impact of different components of liquidity throughout the lifetime of the U.S. Treasury bond. Using the GovPX dataset, we provide a comprehensive empirical analysis of the impact of several liquidity proxies on the relative liquidity premium of these securities. The findings show that the liquidity premium has a deterministic main age-based component. This aging effect extends beyond the simple on-the-run/off-the-run effect. There is also a stochastic component of the liquidity premium that depends on the unexpected value of microstructure-based liquidity proxies and the current market- and bond-level conditions.

Keywords: Liquidity; Fixed income; Pricing; Life cycle; Government bonds (search for similar items in EconPapers)
JEL-codes: G11 G12 G20 E43 (search for similar items in EconPapers)
Date: 2017
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Journal of Financial Markets is currently edited by B. Lehmann, D. Seppi and A. Subrahmanyam

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Handle: RePEc:eee:finmar:v:33:y:2017:i:c:p:42-74