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Liquidity and Trading Dynamics in the Off-the-Run U.S. Treasury Market

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Abstract

In this article, we study trading activity and liquidity of off-the-run U.S. Treasury securities. Off-the-run Treasuries are seasoned securities, account for about 98 percent of all Treasuries outstanding, and played a central role in the pandemic-fueled dash-for-cash in March 2020. Understanding these securities better can improve thinking around how market resilience might be improved. We document and discuss the evolution of trading activity and liquidity for these securities and how these attributes differ from on-the-run securities. We also consider several potential market structure changes that could improve the liquidity of off-the-run Treasuries, including debt buybacks, expanded central clearing, and increased data transparency.

Suggested Citation

  • Alain P. Chaboud & Michael J. Fleming & Ellen Correia Golay & Yesol Huh & Frank M. Keane & Or Shachar, 2025. "Liquidity and Trading Dynamics in the Off-the-Run U.S. Treasury Market," Staff Reports 1170, Federal Reserve Bank of New York.
    • Handle: RePEc:fip:fednsr:102080
    DOI: 10.59576/sr.1170
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    References listed on IDEAS

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    1. Fleming, Michael J, 2002. "Are Larger Treasury Issues More Liquid? Evidence from Bill Reopenings," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 34(3), pages 707-735, August.
    2. Bessembinder, Hendrik & Maxwell, William & Venkataraman, Kumar, 2006. "Market transparency, liquidity externalities, and institutional trading costs in corporate bonds," Journal of Financial Economics, Elsevier, vol. 82(2), pages 251-288, November.
    3. Michael A. Goldstein & Edith S. Hotchkiss & Erik R. Sirri, 2007. "Transparency and Liquidity: A Controlled Experiment on Corporate Bonds," The Review of Financial Studies, Society for Financial Studies, vol. 20(2), pages 235-273.
    4. 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.
    5. Paul Asquith & Thom Covert & Parag Pathak, 2013. "The Effects of Mandatory Transparency in Financial Market Design: Evidence from the Corporate Bond Market," NBER Working Papers 19417, National Bureau of Economic Research, Inc.
    6. Congressional Budget Office, 2025. "The Budget and Economic Outlook: 2025 to 2035," Reports 60870, Congressional Budget Office.
    7. Amy K. Edwards & Lawrence E. Harris & Michael S. Piwowar, 2007. "Corporate Bond Market Transaction Costs and Transparency," Journal of Finance, American Finance Association, vol. 62(3), pages 1421-1451, June.
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    Keywords

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    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G20 - Financial Economics - - Financial Institutions and Services - - - General

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