Trading European Sovereign Bonds: The Microstructure of the MTS Trading Platforms
AbstractWe 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.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 4285.
Date of creation: Mar 2004
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Other versions of this item:
- Cheung, Yiu Chung & de Jong, Frank & Rindi, Barbara, 2005. "Trading European sovereign bonds: the microstructure of the MTS trading platforms," Working Paper Series 0432, European Central Bank.
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
- F31 - International Economics - - International Finance - - - Foreign Exchange
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-06-13 (All new papers)
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- H. Henry Cao & Richard K. Lyons & Martin D.D. Evans, 2003.
NBER Working Papers
9893, National Bureau of Economic Research, Inc.
- Stefania ALBANESI & Barbara RINDI, 2000. "The Quality of the Italian Treasury Bond Market, Asymmetric Information and Transaction Costs," Annales d'Economie et de Statistique, ENSAE, issue 60, pages 1-19.
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