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How Does the Liquidity of New Treasury Securities Evolve?

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Abstract

In a recent Liberty Street Economics post, we showed that the newly reintroduced 20-year bond trades less than other on-the-run Treasury securities and has similar liquidity to that of the more interest‑rate‑sensitive 30-year bond. Is it common for newly introduced securities to trade less and with higher transaction costs, and how does security trading behavior change over time? In this post, we look back at how liquidity evolved for earlier reintroductions of Treasury securities so as to gain insight into how liquidity might evolve for the new 20-year bond.

Suggested Citation

  • Michael J. Fleming, 2020. "How Does the Liquidity of New Treasury Securities Evolve?," Liberty Street Economics 20200826, Federal Reserve Bank of New York.
    • Handle: RePEc:fip:fednls:88629
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    More about this item

    Keywords

    Treasury; liquidity; reintroduction;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets

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