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| Title: | | Macro news, risk-free rates, and the intermediary: Customer orders for thirty-year treasury futures  |
| Authors: | | Menkveld, Albert J. Sarkar, Asani van der Wel, Michel |
| Issue Date: | | 2007 |
| Series/Report no.: | | Staff Report, Federal Reserve Bank of New York 307 |
| 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 |
| Appears in Collections: | | Staff Reports, Federal Reserve Bank of New York
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