Trading European sovereign bonds - the microstructure of the MTS trading platforms

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Trading European sovereign bonds - the microstructure of the MTS trading platforms

Author Info

Yiu Chung Cheung () (Department of Financial Management, University of Amsterdam)
Frank de Jong () (Faculty of Economics and Econometrics, University of Amsterdam)
Barbara Rindi () (Department of Economics, Bocconi University, Italy)

Abstract

We study the microstructure of the MTS Global Market bond trading system, which is the largest interdealer trading system for Eurozone government bonds. Using a unique new dataset we find that quoted and effective spreads are related to maturity and trading intensity. Securities can be traded on a domestic and EuroMTS platform. We show that despite the apparent fragmentation of trading, both platforms are closely connected in terms of liquidity. We also study the intraday price-order flow relation in the Euro bond market. We estimate the price impact of order flow and control for the intraday trading intensity and the announcement of macroeconomic news. The regression results show a larger impact of order flows during announcement days and a higher price impact of trading after a longer period of inactivity. We relate these findings to interdealer trading and to the structure of European bond markets.

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Paper provided by European Central Bank in its series Working Paper Series with number 432.

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Length: 48 pages
Date of creation: Jan 2005
Date of revision:
Handle: RePEc:ecb:ecbwps:20050432

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Find related papers by JEL classification:
F31 - International Economics - - International Finance - - - Foreign Exchange
C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models

This paper has been announced in the following NEP Reports:

NEP-ALL-2005-10-04 (All new papers)
NEP-EEC-2005-10-04 (European Economics)
NEP-FMK-2005-10-04 (Financial Markets)

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

H. Henry Cao & Richard K. Lyons & Martin D.D. Evans, 2003. "Inventory Information," NBER Working Papers 9893, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
Other versions:
- H. Henry Cao & Martin D. Evans & Richard K. Lyons, 2006. "Inventory Information," Journal of Business, University of Chicago Press, vol. 79(1), pages 325-364, January. [Downloadable!]

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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

Schulz, Alexander & Wolff, Guntram B., 2008. "Sovereign bond market integration: the euro, trading platforms and globalization," Discussion Paper Series 1: Economic Studies 2008,12, Deutsche Bundesbank, Research Centre. [Downloadable!]
Alessandro Beber & Michael W. Brandt & Kenneth A. Kavajecz, 2006. "Flight-to-Quality or Flight-to-Liquidity? Evidence From the Euro-Area Bond Market," NBER Working Papers 12376, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)

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