Yield drifts when issuance comes before macro news

Dong Lou, Gabor Pinter, Semih Üslü and Danny Walker

Journal of Financial Economics, 2025, vol. 165, issue C

Abstract: UK government bond yields tend to drift upwards before scheduled news such as monetary policy announcements and labour market data releases. This effect is particularly pronounced during periods of UK bond issuance and is linked to higher term premia. Financial intermediary constraints play a role as dealers avoid accumulating inventory in pre-news windows following issuance. The composition of liquidity providers also shifts: hedge funds buy a large share of the bond issuance outside pre-news windows, but more passive investors – such as foreign central banks and pension funds – provide liquidity in pre-news windows. We outline a simple model to rationalize these findings.

Keywords: Macro news; Yield drift; Bond supply; Liquidity provision (search for similar items in EconPapers)
JEL-codes: D83 D84 G11 G12 G14 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:165:y:2025:i:c:s0304405x25000017

DOI: 10.1016/j.jfineco.2025.103993

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