Informed trading in government bond markets

Robert Czech, Shiyang Huang (), Dong Lou () and Tianyu Wang ()
Additional contact information
Shiyang Huang: University of Hong Kong
Dong Lou: London School of Economics and CEPR
Tianyu Wang: Tsinghua University

No 871, Bank of England working papers from Bank of England

Abstract: Using comprehensive regulatory data, we examine trading by different investor types in government bond markets. Our sample covers virtually all secondary market trading in gilts and contains detailed information on each transaction, including the identities of both counterparties. We find that hedge funds’ daily trading positively forecasts gilt returns in the following one to five days, which is then fully reversed in the following month. A part of this short-term return predictability is due to hedge funds’ ability to anticipate future demand of other investors. Mutual fund trading also positively predicts gilt returns, but over a longer horizon of one to two months. This return pattern does not revert in the following year and is partly due to mutual funds’ ability to forecast changes in short-term interest rates.

Keywords: Government bonds; informed trading; return predictability; asset managers (search for similar items in EconPapers)
JEL-codes: G11 G12 G14 G23 (search for similar items in EconPapers)
Pages: 55 pages
Date: 2020-06-15
New Economics Papers: this item is included in nep-fmk
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Related works:
Journal Article: Informed trading in government bond markets (2021)
Working Paper: Informed trading in government bond markets (2021)
Working Paper: Informed trading in government bond markets (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:boe:boeewp:0871

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