The High Frequency Economics of Government Bond Markets Public Deposited

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  • March 19, 2019
  • Nguyen, Giang
    • Affiliation: College of Arts and Sciences, Department of Economics
  • This dissertation is a collection of four essays examining different aspects of government bond markets, with a special focus on the US Treasury securities. The first is a comprehensive study of the microstructure of BrokerTec, the larger of the two electronic interdealer trading platforms for US Treasury securities, providing institutional background essential for subsequent studies. We characterize empirically market activities and the price discovery process. We show that both limit orders and trades affect prices, and that these effects are greater around monetary policy announcements. Contrary to previous findings pertaining to equity markets, we find that iceberg orders, which allow traders to hide liquidity, are not used frequently, even around volatile times. The second essay examines closely a frequently used channel of hidden liquidity -- the workup protocol. We ask whether trading activities during workups contain any private information and leave harmful effects on uninformed traders. We find that workup activities account for a significant portion of market liquidity not ex ante observable, but they tend to be less informative than transparent trades. We show that workups are used more often, but contain relatively less information, around volatile times, indicating that workups tend to be used as a channel to guard against adverse price movements, rather than as a channel to hide private information. In the third essay, we propose a novel model to study jointly the intraday dynamics of liquidity and price risks, two important determinants of bond yields. We show that liquidity declines sharply during the 2008 crisis and on flight--to--safety days, accompanied by increased price volatility. Our model also reveals a negative feedback effect between liquidity and volatility, and that each becomes more persistent during the crisis. The fourth study provides an international perspective by studying the propagation of liquidity and volatility shocks during the 2010-2012 sovereign debt crisis across major euro-area bond markets, namely Belgium, France, Germany, Italy, the Netherlands, and Spain. We show that liquidity is generally the more important source of shocks transmitted across the borders, and this transmission largely originates from Italy and around the Italian crisis.
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Rights statement
  • In Copyright
  • Francis, Neville
  • Reed, Adam
  • Hill, Jonathan
  • Renault, Eric
  • Fleming, Michael
  • Ghysels, Eric
  • Doctor of Philosophy
Degree granting institution
  • University of North Carolina at Chapel Hill Graduate School
Graduation year
  • 2014
Place of publication
  • Chapel Hill, NC
  • This item is restricted from public view for 2 years after publication.

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