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http://hdl.handle.net/2451/26849
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| Title: | Economic News and the Yield Curve: Evidence from the U.S. Treasury Market |
| Authors: | Balduzzi, Pierluigi
Elton, Edwin J.
Green, Clifton T. |
| Issue Date: | Oct-1997 |
| Series/Report no.: | FIN-98-005 |
| Abstract: | This paper examines newly-available intra-day data from the inter-dealer
government bond market to investigate the effects of economic-news
announcements on prices, trading volume, and bid-ask spreads. The use of
intra-day price data together with data on market expectations allows us
to obtain new and different results relative to previous studies. We
find a total of seventeen economic announcements to have a significant
impact on the price of at least one of the following instruments: a
three-month bill, a two ' and ten year note, and a thirty year bond. Ten
of them significantly affect all note and bond prices. For announcements
that have a significant impact on prices, the impact occurs within one
minute after the announcement. Interestingly, only three announcements
affect the bill price. This suggests that at least two factors of
uncertainty are needed to model the yield curve. For the ten-year note
we find a strong association between announcements and trading volume.
Economic announcements have less effect on trading volume for the
three-month bill, although changes in monetary policy lead to an average
trading volume up to nine times higher than at non-announcement times.
Bid-ask spreads widen immediately after most economic announcements, but
then return to normal levels within 5 to 15 minutes. For almost all
announcements, volatility is significantly higher after the release,
especially for the announcements that significantly affect prices. |
| URI: | http://hdl.handle.net/2451/26849 |
| Appears in Collections: | Economics Working Papers
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