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The Us Treasury Market In August 1998: Untangling The Effects Og Hong Kong And Russia With High Frequency Data

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Author Info
Mardi Dungey ()
Charles Goodhart
Demosthenes Tambakis

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Abstract

The second half of AUgust 1998 was dominated by two events. From 14 to 28 August the Hong Kong Monetary Authority (HKMA) intervened in the Hong Kong equity markets to prevent a speculative double play against their currency board. On 17 August Russia announced its default on sovereign bonds. This paper demonstrates that the HKMA interventions had a substantial impact on the outcomes for US Treasury markets during this period. Using a careful analysis of high frequency bond market data both events are shown to intersect in the US Treasury market, despite having originated from seemingly unrelated shocks. On this evidence the shocks emanating from Hong Kong were important for the US Treasury market. The lesson for policy makers is that major markets play an important role in transmitting and absorbing the effects of unrelated shocks.

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Publisher Info
Paper provided by Australian National University, Centre for Applied Macroeconomic Analysis in its series CAMA Working Papers with number 2005-25.

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Length: 34 pages
Date of creation: Sep 2005
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Handle: RePEc:acb:camaaa:2005-25

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Find related papers by JEL classification:
F37 - International Economics - - International Finance - - - International Finance Forecasting and Simulation
F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission

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  1. L. Vanessa Smith & Demosthenes Tambakis, 2008. "Testing for changing persistence in US Treasury on/off spreads under weighted-symmetric estimation," European Journal of Finance, Taylor and Francis Journals, vol. 14(2), pages 75-89. [Downloadable!] (restricted)
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    Other versions:
  3. T. Clifton Green, 2004. "Economic News and the Impact of Trading on Bond Prices," Journal of Finance, American Finance Association, vol. 59(3), pages 1201-1234, 06. [Downloadable!] (restricted)
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    Other versions:
  15. J. Doyne Farmer & Laszlo Gillemot & Fabrizio Lillo & Szabolcs Mike & Anindya Sen, 2003. "What really causes large price changes?," Quantitative Finance Papers cond-mat/0312703, arXiv.org, revised Apr 2004. [Downloadable!]
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  17. Dungey, Mardi & Fry, Renee & Gonzalez-Hermosillo, Brenda & Martin, Vance, 2006. "Contagion in international bond markets during the Russian and the LTCM crises," Journal of Financial Stability, Elsevier, vol. 2(1), pages 1-27, April. [Downloadable!] (restricted)
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