30-Day Interbank futures: Investigating the process of price discovery following RBA cash target rate announcements

Lee Smales

Journal of International Financial Markets, Institutions and Money, 2012, vol. 22, issue 4, 1006-1023

Abstract: The article examines microstructure issues in the Australian Interbank futures market by analyzing the price adjustment process following scheduled cash target rate announcements by the Reserve Bank of Australia. In characterizing the market response, three distinct stages of price formation and liquidity provision are identified. Market expectations around the RBA decision are derived explicitly from 30-Day Interbank futures. The first trade following the RBA decision occurs after 220s on average, and after 234s (1.73 trades) the market has adjusted to the theoretical settlement price. Deviations from theoretical prices post-announcement are common, particularly when a large amount of uncertainty exists around the RBA decision. The potentially costly issue of stale price quotes is also addressed.

Keywords: Target rate announcement; Futures markets; Price discovery; RBA (search for similar items in EconPapers)
JEL-codes: G10 G13 G14 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1042443112000029
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:22:y:2012:i:4:p:1006-1023

DOI: 10.1016/j.intfin.2011.12.004

Access Statistics for this article

Journal of International Financial Markets, Institutions and Money is currently edited by I. Mathur and C. J. Neely

More articles in Journal of International Financial Markets, Institutions and Money from Elsevier
Bibliographic data for series maintained by Catherine Liu ().