Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/60709 
Year of Publication: 
2007
Series/Report no.: 
Staff Report No. 307
Publisher: 
Federal Reserve Bank of New York, New York, NY
Abstract: 
Customer order flow correlates with permanent price changes in equity and non-equity markets. We examine macro news events in the thirty-year Treasury futures market to identify causality from customer flow to risk-free rates. We remove the positive feedback trading effect and establish that, in the fifteen minutes subsequent to the news, intermediaries rely on customer orders to determine a substantial part of the announcement’s effect on risk-free rates—about one-third relative to the instantaneous effect. Intermediaries appear to benefit from privately observing informed customers, since their own-account trade profitability correlates with access to customer flow, controlling for volatility, competition, and the macro “surprise.”
Subjects: 
discount rate, macroeconomic announcements, customer order flow, intermediary, Treasury futures, informativeness
JEL: 
G14
E44
Document Type: 
Working Paper

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