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The microstructure of the U.S. treasury market

  • Bruce Mizrach
  • Christopher J. Neely

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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  7. Pierluigi Balduzzi & Edwin J. Elton & T. Clifton Green, 1996. "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 96-13, New York University, Leonard N. Stern School of Business-.
  8. Bruce Mizrach & Christopher J. Neely, 2006. "The transition to electronic communications networks in the secondary treasury market," Review, Federal Reserve Bank of St. Louis, issue Nov, pages 527-542.
  9. Upper, Christian & Werner, Thomas, 2002. "Tail Wags Dog? Time-Varying Information Shares in the Bund Market," Discussion Paper Series 1: Economic Studies 2002,24, Deutsche Bundesbank, Research Centre.
  10. Kenneth D. Garbade & Jeffrey F. Ingber, 2005. "The Treasury auction process: objectives, structure, and recent acquisitions," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 11(Feb).
  11. Michael Fleming & Bruce Mizrach, 2008. "The Microstructure of a U.S. Treasury ECN: The Brokertec Platform," Departmental Working Papers 200803, Rutgers University, Department of Economics.
  12. Gonzalo, J. & Granger, C., 1992. "Estimation of Common Long-Memory Components in Cointegrated Systems," Papers 4, Boston University - Department of Economics.
  13. 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.
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  15. Flannery, Mark J & Protopapadakis, Aris A, 1988. " From T-Bills to Common Stocks: Investigating the Generality of Intra-Week Return Seasonality," Journal of Finance, American Finance Association, vol. 43(2), pages 431-50, June.
  16. James D. Hamilton, 2007. "Assessing Monetary Policy Effects Using Daily Fed Funds Futures Contracts," NBER Working Papers 13569, National Bureau of Economic Research, Inc.
  17. de Goeij, P. C. & Marquering, W., 2006. "Macroeconomic announcements and asymmetric volatility in bond returns," Other publications TiSEM bc4389f3-bad2-4e5b-b996-3, School of Economics and Management.
  18. Mark Griffiths & Drew Winters, 1997. "On a Preferred Habitat for Liquidity at the Turn-of-the-Year: Evidence from the Term-Repo Market," Journal of Financial Services Research, Springer, vol. 12(1), pages 21-38, August.
  19. Jones, Charles M. & Lamont, Owen & Lumsdaine, Robin L., 1998. "Macroeconomic news and bond market volatility," Journal of Financial Economics, Elsevier, vol. 47(3), pages 315-337, March.
  20. Michael J. Fleming, 2003. "Measuring treasury market liquidity," Economic Policy Review, Federal Reserve Bank of New York, issue Sep, pages 83-108.
  21. Madhavan, Ananth & Richardson, Matthew & Roomans, Mark, 1997. "Why Do Security Prices Change? A Transaction-Level Analysis of NYSE Stocks," Review of Financial Studies, Society for Financial Studies, vol. 10(4), pages 1035-64.
  22. Huang, Roger D. & Cai, Jun & Wang, Xiaozu, 2002. "Information-Based Trading in the Treasury Note Interdealer Broker Market," Journal of Financial Intermediation, Elsevier, vol. 11(3), pages 269-296, July.
  23. Andersen, Torben G. & Bollerslev, Tim & Diebold, Francis X. & Vega, Clara, 2004. "Real-time price discovery in stock, bond and foreign exchange markets," CFS Working Paper Series 2004/19, Center for Financial Studies (CFS).
  24. Michael J. Fleming & Eli M. Remolona, 1997. "What moves the bond market?," Economic Policy Review, Federal Reserve Bank of New York, issue Dec, pages 31-50.
  25. B. Mizrach, 2006. "Does SIZE matter? Liquidity Provision by the Nasdaq Anonymous Trading Facility," Competition and Regulation in Network Industries, Intersentia, vol. 7(4), pages 471-486, December.
  26. Johnston, Elizabeth Tashijan & Kracaw, William A. & McConnell, John J., 1991. "Day-of-the-Week Effects in Financial Futures: An Analysis of GNMA, T-Bond, T-Note, and T-Bill Contracts," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 26(01), pages 23-44, March.
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  28. William Poole & Robert Rasche, 2000. "Perfecting the Market's Knowledge of Monetary Policy," Journal of Financial Services Research, Springer, vol. 18(2), pages 255-298, December.
  29. de Goeij, Peter & Marquering, Wessel, 2006. "Macroeconomic announcements and asymmetric volatility in bond returns," Journal of Banking & Finance, Elsevier, vol. 30(10), pages 2659-2680, October.
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  31. 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.
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  34. repec:ner:tilbur:urn:nbn:nl:ui:12-194710 is not listed on IDEAS
  35. Bruce Mizrach & Christopher J. Neely, 2007. "Information shares in the U.S. treasury market," Working Papers 2005-070, Federal Reserve Bank of St. Louis.
  36. 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.
  37. T. Clifton Green, 2004. "Economic News and the Impact of Trading on Bond Prices," Journal of Finance, American Finance Association, vol. 59(3), pages 1201-1234, 06.
  38. 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.
  39. 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.
  40. 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.
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