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The Effect of Transaction Size on Off-the-Run Treasury Prices

Published online by Cambridge University Press:  06 April 2009

David F. Babbel ,
Craig B. Merrill ,
Mark F. Meyer  and
Meiring de Villiers
David F. Babbel
Affiliation:
babbel@wharton.upenn.edu, Wharton School, University of Pennsylvania, 3641 Locust Walk, Philadelphia, PA 19104;
Craig B. Merrill
Affiliation:
merrill@byu.edu, Marriott School of Management, Brigham Young University, 678 TNRB, Provo, UT 84604;
Mark F. Meyer
Affiliation:
m.meyer@econgroup.com, Princeton Economics Group Inc., 707 State Road, Suite 223, Princeton, NJ 08540;
Meiring de Villiers
Affiliation:
mdv@stanford.edu, Stanford University, Department of Management Science and Engineering, Stanford, CA 94305.
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Abstract

This paper examines intra-day trading data from the inter-dealer broker market for U.S. Treasury securities and measures the degree of price pressure in the off-the-run Treasury market. As is well known, securities that would appear to be very close substitutes, i.e., on-the-run and off-the-run Treasury bonds, behave as if there is some degree of market segmentation. This is the first systematic study of the off-the-run Treasury note and bond market focused entirely on a price pressure effect using intra-day data. The paper analyzes price pressure through matched pairs of securities that differ only in liquidity.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 39 , Issue 3 , September 2004 , pp. 595 - 611
Copyright
Copyright © School of Business Administration, University of Washington 2004

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