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The microstructure of the U.S. treasury market

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Author Info
Bruce Mizrach
Christopher J. Neely

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Abstract

This article discusses the microstructure of the U.S. Treasury securities market. Treasury securities are nominally riskless debt instruments issued by the U.S. government. Microstructural analysis is a field of economics/finance that examines the roles played by heterogenous agents, institutional detail, and asymmetric information in the trading process. The article describes types of Treasury issues; stages of the Treasury market; the major players, including the role of the Federal Reserve Bank of New York and the interdealer brokers; the structure of both the spot and futures markets; the findings of the seasonality/announcement and order book literature; and research on price discovery. We conclude by discussing possible future avenues of research.

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Paper provided by Federal Reserve Bank of St. Louis in its series Working Papers with number 2007-052.

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Date of creation: 2007
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Handle: RePEc:fip:fedlwp:2007-052

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Keywords: Government securities;

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  7. Baillie, Richard T. & Geoffrey Booth, G. & Tse, Yiuman & Zabotina, Tatyana, 2002. "Price discovery and common factor models," Journal of Financial Markets, Elsevier, vol. 5(3), pages 309-321, July. [Downloadable!] (restricted)
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  9. Andersen, Torben G. & Bollerslev, Tim & Diebold, Francis X. & Vega, Clara, 2007. "Real-time price discovery in global stock, bond and foreign exchange markets," Journal of International Economics, Elsevier, vol. 73(2), pages 251-277, November. [Downloadable!] (restricted)
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  10. William Poole & Robert H & Rasche & Daniel L. Thornton, 2002. "Market anticipations of monetary policy actions," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 65-94. [Downloadable!]
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  19. Pierre-Olivier Weill & Dimitri Vayanos, 2007. "A Search-Based Theory of the On-the-Run Phenomenon," FMG Discussion Papers dp577, Financial Markets Group. [Downloadable!] (restricted)
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  20. deB. Harris, Frederick H. & McInish, Thomas H. & Wood, Robert A., 2002. "Security price adjustment across exchanges: an investigation of common factor components for Dow stocks," Journal of Financial Markets, Elsevier, vol. 5(3), pages 277-308, July. [Downloadable!] (restricted)
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  22. Bruce Mizrach, 2006. "Does SIZE Matter? Liquidity Provision by the Nasdaq Anonymous Trading Facility," Departmental Working Papers 200602, Rutgers University, Department of Economics. [Downloadable!]
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  24. Pierluigi Balduzzi & Edwin J. Elton & T. Clifton Green, 1997. "Economic News and the Yield Curve: Evidence from the U.S. Treasury Market," New York University, Leonard N. Stern School Finance Department Working Paper Seires 98-005, New York University, Leonard N. Stern School of Business-.
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  25. Ederington, Louis H & Lee, Jae Ha, 1993. " How Markets Process Information: News Releases and Volatility," Journal of Finance, American Finance Association, vol. 48(4), pages 1161-91, September. [Downloadable!] (restricted)
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  30. Torben G. Andersen & Tim Bollerslev & Francis X. Diebold & Clara Vega, 2003. "Real-Time Price Discovery in Stock, Bond and Foreign Exchange Markets," PIER Working Paper Archive 04-028, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 28 Jun 2004. [Downloadable!]
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  31. Nyborg, Kjell G. & Sundaresan, Suresh, 1996. "Discriminatory versus uniform Treasury auctions: Evidence from when-issued transactions," Journal of Financial Economics, Elsevier, vol. 42(1), pages 63-104, September. [Downloadable!] (restricted)
  32. Michael J. Fleming, 2003. "Measuring treasury market liquidity," Economic Policy Review, Federal Reserve Bank of New York, issue Sep, pages 83-108. [Downloadable!]
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  33. Ederington, Louis H. & Lee, Jae Ha, 1995. "The Short-Run Dynamics of the Price Adjustment to New Information," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 30(01), pages 117-134, March. [Downloadable!]
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  35. Michael J. Barclay & Terrence Hendershott & Kenneth Kotz, 2006. "Automation versus Intermediation: Evidence from Treasuries Going Off the Run," Journal of Finance, American Finance Association, vol. 61(5), pages 2395-2414, October. [Downloadable!] (restricted)
  36. Kuttner, Kenneth N., 2001. "Monetary policy surprises and interest rates: Evidence from the Fed funds futures market," Journal of Monetary Economics, Elsevier, vol. 47(3), pages 523-544, June. [Downloadable!] (restricted)
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  37. Jérôme Lahaye & Sébastien Laurent & Christopher J. Neely, 2007. "Jumps, cojumps and macro announcements," Working Papers 2007-032, Federal Reserve Bank of St. Louis. [Downloadable!]
  38. Christopher J. Neely & Drew B. Winters, 2005. "Year-end seasonality in one-month LIBOR derivatives," Working Papers 2003-040, Federal Reserve Bank of St. Louis. [Downloadable!]
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