{"id":9091,"date":"2009-12-18T21:18:44","date_gmt":"2009-12-19T01:18:44","guid":{"rendered":"http:\/\/www.prefblog.com\/?p=9091"},"modified":"2009-12-18T21:18:44","modified_gmt":"2009-12-19T01:18:44","slug":"tips-market-microstructure","status":"publish","type":"post","link":"https:\/\/prefblog.com\/?p=9091","title":{"rendered":"TIPS Market Microstructure"},"content":{"rendered":"

The Federal Reserve Bank of New York has published a staff report by Michael J. Fleming and Neel Krishnan title The Microstructure of the TIPS Market<\/a>. The authors examined the electronic records of inter-dealer broker trading, which provided quotes and trade sizes, everything time-stamped to the second. Nothing particularly useful here, perhaps, but there are some items of interest.<\/p>\n

Trading activity for on-the-run TIPS is substantially higher than it is for off-the-run TIPS (Table 3). Daily trading in the on-the-run 10-year note thus averages $137 million, more than six times higher than average trading volume ($22 million) of individual off-the-run 10-year notes. The comparable ratio for the 5-year note is just over three ($87 million versus $27 million) and it is somewhat less than five for the 20-year bond ($30 million versus $6 million). Such on-the-run\/off-the-run differentials are just as striking in the nominal market (Fleming (2002), Fabozzi and Fleming (2005), Goldreich, Hanke, and Nath (2005), and Barclay, Hendershott, and Kotz (2006)), reflecting a concentration of liquidity in just a few securities, and in those securities that tend to have the largest floating supplies.<\/p>\n

While there is a similar on-the-run\/off-the-run divergence in daily trading frequency, such a pattern is not evident in trade size. In fact, average trade sizes are actually slightly higher for off-the-run TIPS.<\/p><\/blockquote>\n

While bid-ask spreads and quoted depth are similar for on-the-run and off-the-run securities, \u201cquote incidence\u201d is markedly higher for on-the-run securities. Quote incidence gauges the percent of time there are two-sided quotes in a security (that is, both a posted bid price and a posted offer price). This proportion averages close to 60% for the on-the-run 10-year note (during New York trading hours, defined as 7:30 a.m. to 5 p.m.), but only about 15% for any given off-the-run 10-year note. That is, for off-the-run 10-year notes, there is a one-sided quote, or no quote, about 85% of the time.<\/p><\/blockquote>\n

There are pronounced day-of-week effects in trading activity in the TIPS market, as there are in the nominal market. In particular, trading volume is lowest on Monday, averaging $424 million, highest on Wednesday and Thursday, averaging $615 and $658 million, respectively, with Tuesday and Friday in between, at $552 and $546 million, respectively. These patterns remain when controlling for the announcements examined in this paper.<\/p><\/blockquote>\n","protected":false},"excerpt":{"rendered":"

The Federal Reserve Bank of New York has published a staff report by Michael J. Fleming and Neel Krishnan title The Microstructure of the TIPS Market. The authors examined the electronic records of inter-dealer broker …<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[12],"tags":[],"class_list":["post-9091","post","type-post","status-publish","format-standard","hentry","category-interesting-external-papers"],"_links":{"self":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/9091","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=9091"}],"version-history":[{"count":0,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/9091\/revisions"}],"wp:attachment":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=9091"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=9091"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=9091"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}