The Impact of Public Announcements and Private Analyses on US Treasury Bonds

Abstract

This article examines the informational role of trading around the announcement of 8:30 a.m. economic news in the US Treasury market, and investigates whether there is speculative trading before the US news release in the US and London markets. The current paper extends Green’s (2004) study of 5-year notes into a study of 2-, 5-, and 10-year notes, and confirms Green’s finding that the informational role of trading increases following announcements. The results indicate that the informational role of trading before the US news release is significantly greater in the London market, and that the order flow of the London market is significantly and positively related to post-announcement return when the surprise in the US economic news is high, which implies that traders trade speculatively in the London market.

TOPICS: Volatility measures, developed markets, other real assets

Key Findings

• ▪ Informed trading before the US news release is greater in the London market.

• ▪ Traders speculate in the London market before high-surprise US economic news.

• ▪ Some traders in the US Treasury market are able to forecast future price changes.