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

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  • Cheung, Yiu Chung
  • de Jong, Frank
  • Rindi, Barbara

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. JEL Classification: F31, C32

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Bibliographic Info

Paper provided by European Central Bank in its series Working Paper Series with number 0432.

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Date of creation: Jan 2005
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Handle: RePEc:ecb:ecbwps:20050432

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Keywords: Bonds markets; Microstructure; order flow;

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  1. H. Henry Cao & Richard K. Lyons & Martin D.D. Evans, 2003. "Inventory Information," NBER Working Papers 9893, National Bureau of Economic Research, Inc.
  2. 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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