Quoted Spreads and Trade Imbalance Dynamics in the European Treasury Bond Market

Guglielmo Maria Caporale, Alessandro Girardi and Paolo Paesani ()

No 3281, CESifo Working Paper Series from CESifo

Abstract: Using high-frequency transaction data for the three largest European markets (France, Germany and Italy), this paper documents the existence of an asymmetric relationship between market liquidity and trading imbalances: when quoted spreads rise (fall) and liquidity falls (increases) buy (sell) orders tend to prevail. Risk-averse market-makers, with inventory-depletion risk being their main concern, tend to quote wider (narrower) spreads when they think bond appreciation is more (less) likely to occur. It is also found that the probability of being in a specific regime is related to observable bond market characteristics, stock market volatility, macroeconomic releases and liquidity management operations of the monetary authorities.

Keywords: liquidity; trading activity; treasury bond market; Europe; commonality (search for similar items in EconPapers)
JEL-codes: C32 C33 G10 G15 (search for similar items in EconPapers)
Date: 2010
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://www.cesifo.org/DocDL/cesifo1_wp3281.pdf (application/pdf)

Related works:
Journal Article: Quoted spreads and trade imbalance dynamics in the European Treasury bond market (2012)
Working Paper: Quoted Spreads and Trade Imbalance Dynamics in the European Treasury Bond Market (2010)
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:ces:ceswps:_3281

Access Statistics for this paper

More papers in CESifo Working Paper Series from CESifo Contact information at EDIRC.
Bibliographic data for series maintained by Klaus Wohlrabe ().