Economic News and the Yield Curve: Evidence from the U.S. Treasury Market
نویسندگان
چکیده
This paper examines newly-available intra-day data from the interdealer government bond market to investigate the effects of economic-news announcements on prices, trading volume, and bid-ask spreads. The use of this new data set together with data on market expectations allows us to obtain new and different results regarding which announcements are important relative to previous studies. In fact, this is the first paper to separate out the effects of concurrent announcements, the first to measure the intra-day price impact of announcements, and the first to study the effect of announcements on bid-ask spreads and trading volume. 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 threemonth bill, a twoand ten-year note, and a thirty-year bond. Eight of them significantly affect all instruments. For announcements that have a significant impact on prices, the impact generally occurs within one minute after the announcement. We explore these effects further for the ten-year note and the three-month bill, for the announcements that significantly affect their prices. We find a strong association between announcements and trading volume. 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.
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