Price Discovery in the U.S. Treasury Market: The Impact of Orderflow and Liquidity on the Yield Curve

Michael W. Brandt and Kenneth A. Kavajecz

No 9529, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We examine the role of price discovery in the U.S. Treasury market through the empirical relationship between orderflow, liquidity, and the yield curve. We find that orderflow imbalances (excess buying or selling pressure) can account for as much as 26 percent of the day-to-day variation in yields on days without major macroeconomic announcements. The effect of orderflow on yields is permanent and strongest when liquidity is low. All of the evidence points toward an important role of price discovery on understanding the behavior of the yield curve.

JEL-codes: G0 (search for similar items in EconPapers)
Date: 2003-03
New Economics Papers: this item is included in nep-fin, nep-fmk and nep-mac
Note: AP ME
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Published as Brandt, Michael W. and Kenneth A. Kavajecz. "Price Discovery In The U.S. Treasury Market: The Impact Of Orderflow And Liquidity On The Yield Curve," Journal of Finance, 2004, v59(6,Dec), 2623-2654.

Downloads: (external link)
http://www.nber.org/papers/w9529.pdf (application/pdf)

Related works:
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:nbr:nberwo:9529

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w9529

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().