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Bond futures and order imbalance

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  • Smales, Lee A.

Abstract

Order imbalance methodology is utilized to examine the link between trading activity and returns in the six most liquid international bond futures markets. Order imbalances are strongly related to contemporaneous returns, in the expected direction (i.e. excess buy (sell) orders push down (up) yields), even after controlling for aggregate market volume. There is evidence of contrarian investor behaviour following an increase in yields, but continuation of order imbalances when yields are falling (the prices of bond futures are rising). International bond futures markets are strongly intertwined with the US market having a strong influence on the returns and order-flow across all countries; this is likely an indication of the spill-over effect of US macroeconomic data.

Suggested Citation

  • Smales, Lee A., 2013. "Bond futures and order imbalance," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 26(C), pages 113-132.
    • Handle: RePEc:eee:intfin:v:26:y:2013:i:c:p:113-132
    DOI: 10.1016/j.intfin.2013.05.006
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    Cited by:

    1. Kanas, Angelos, 2014. "Bond futures, inflation-indexed bonds, and inflation risk premium," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 28(C), pages 82-99.

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    More about this item

    Keywords

    Futures markets; Order imbalance; Bond futures; VAR; Spill-over effect;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G2 - Financial Economics - - Financial Institutions and Services

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