Are larger Treasury issues more liquid? Evidence from bill reopenings

Michael Fleming

No 145, Staff Reports from Federal Reserve Bank of New York

Abstract: This paper makes use of a natural experiment of the U.S. Treasury Department to examine the relationship between Treasury security issue size and liquidity. Treasury bills that were first issued with fifty-two weeks to maturity and then reopened at twenty-six weeks are shown to be more liquid than comparable maturity bills that were first issued with twenty-six weeks to maturity. The relationship is less pronounced when bills are on-the-run (the most recently auctioned bills of a given maturity) than when they are off-the-run, and persists when controlling for other factors that affect liquidity. The reopened bills are found to have higher yields (lower prices) than comparable maturity bills, showing that the indirect liquidity benefits of reopenings are more than offset by the direct supply costs.

Keywords: Treasury Market; Liquidity; Bid-ask spread; Trading volume; Issue size (search for similar items in EconPapers)
JEL-codes: G12 G14 H63 (search for similar items in EconPapers)
Date: 2002
New Economics Papers: this item is included in nep-fmk
Note: For a published version of this report, see Michael J. Fleming, "Are Larger Treasury Issues More Liquid? Evidence from Bill Reopenings," Journal of Money, Credit, and Banking34, no. 3, part 2 (August 2002): 707-35.
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Citations: View citations in EconPapers (47)

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Journal Article: Are Larger Treasury Issues More Liquid? Evidence from Bill Reopenings (2002)
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