Trading European Sovereign Bonds: The Microstructure of the MTS Trading Platforms

Frank de Jong, Barbara Rindi () and Yiu Chung Cheung

No 4285, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We study the microstructure of the MTS Global Market bond trading system. This system is the largest pan-European interdealer trading system for Eurozone government bonds. We study the volume weighted quoted spread and a variety of effective spread measures for different classes of bond maturities and issuing countries. We find that quoted and effective spreads are related to maturity and trading intensity. Estimated spreads on EuroMTS are typically slightly higher than on the domestic markets, but the difference is small in economic terms. The regression results show that order flow plays a key role in determining the price discovery in the bond market. Transitory costs are more important in markets like Italy and Belgium, which are dominated by local traders. In addition, we find a positive relationship between trading intensity and price returns, indicating findings relevant to the structure of bond markets and interdealer trading.

Keywords: Bonds markets; Microstructure; Order flow (search for similar items in EconPapers)
JEL-codes: C32 F31 (search for similar items in EconPapers)
Date: 2004-03
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Citations: View citations in EconPapers (23)

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