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Title:Macro news, risk-free rates, and the intermediary: Customer orders for thirty-year treasury futures PDF Logo
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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