Journal of Finance Vol. 54 No. 5 1999
Price Formation and Liquidity in the U.S. Treasury Market: The Response to Public Information
open access
Abstract
The arrival of public information in the U.S. Treasury market sets off a two‐stage adjustment process for prices, trading volume, and bid‐ask spreads. In a brief first stage, the release of a major macroeconomic announcement induces a sharp and nearly instantaneous price change with a reduction in trading volume, demonstrating that price reactions to public information do not require trading. The spread widens dramatically at announcement, evidently driven by inventory control concerns. In a prolonged second stage, trading volume surges, price volatility persists, and spreads remain moderately wide as investors trade to reconcile residual differences in their private views.
- DOI
- 10.1111/0022-1082.00172
- Volume
- 54
- Issue
- 5
- Pages
- 1901-1915
- Language
- en
- Sources
- crossref openalex