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Economic announcements and the 10-year US Treasury bond: Surprising findings without the surprise component

Author

Listed:
  • Degiannakis, Stavros
  • Filis, George
  • Tsemperlidis, Stefanos

Abstract

The role of information flows for the formation of assets prices remains an open question despite the extensive literature concerning this issue. This is due (i) to the high complexity of markets themselves, (ii) the proliferation of information flows and (iii) the difficulties in determining the effects of information on financial markets. In the current study we identify the announcements that trigger substantial changes in the behavior of the 10-year US Treasury bond market, without using the surprise component and, therefore, expectational data, which are expensive and dubious. To do so, we use a novel model-free approach based on extreme market movements. Our findings corroborate those of previous studies, which were based on expectational data. More importantly, though, we identify two additional announcements (Oil Inventories and the Mortgage Applications), which have not been previously reported. These findings are primarily important to financial analysts and investors.

Suggested Citation

  • Degiannakis, Stavros & Filis, George & Tsemperlidis, Stefanos, 2018. "Economic announcements and the 10-year US Treasury bond: Surprising findings without the surprise component," MPRA Paper 94176, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:94176
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    File URL: https://mpra.ub.uni-muenchen.de/94176/1/MPRA_paper_94176.pdf
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    References listed on IDEAS

    as
    1. Bassam Fattouh, Lutz Kilian, and Lavan Mahadeva, 2013. "The Role of Speculation in Oil Markets: What Have We Learned So Far?," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3).
    2. Monticini, Andrea & Peel, David & Vaciago, Giacomo, 2011. "The impact of ECB and FED announcements on the Euro interest rates," Economics Letters, Elsevier, vol. 113(2), pages 139-142.
    3. Beechey, Meredith J. & Wright, Jonathan H., 2009. "The high-frequency impact of news on long-term yields and forward rates: Is it real?," Journal of Monetary Economics, Elsevier, vol. 56(4), pages 535-544, May.
    4. 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.
    5. Rosa, Carlo, 2016. "Walking on thin ice: Market quality around FOMC announcements," Economics Letters, Elsevier, vol. 138(C), pages 5-8.
    6. Evans, Kevin P., 2011. "Intraday jumps and US macroeconomic news announcements," Journal of Banking & Finance, Elsevier, vol. 35(10), pages 2511-2527, October.
    7. Dungey, Mardi & McKenzie, Michael & Smith, L. Vanessa, 2009. "Empirical evidence on jumps in the term structure of the US Treasury Market," Journal of Empirical Finance, Elsevier, vol. 16(3), pages 430-445, June.
    8. Engle, Robert F & Ng, Victor K, 1993. " Measuring and Testing the Impact of News on Volatility," Journal of Finance, American Finance Association, vol. 48(5), pages 1749-1778, December.
    9. Roberto Rigobon & Brian Sack, 2008. "Noisy Macroeconomic Announcements, Monetary Policy, and Asset Prices," NBER Chapters,in: Asset Prices and Monetary Policy, pages 335-370 National Bureau of Economic Research, Inc.
    10. 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.
    11. Michael J. Fleming & Eli M. Remolona, 1999. "Price Formation and Liquidity in the U.S. Treasury Market: The Response to Public Information," Journal of Finance, American Finance Association, vol. 54(5), pages 1901-1915, October.
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    More about this item

    Keywords

    US Treasury market; economic announcements; event studies.;

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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