The Effect of Transaction Size on Off-the-Run Treasury Prices

Wharton Financial Institutions Center Working Paper No. 01-03

29 Pages Posted: 4 May 2001

See all articles by David F. Babbel

David F. Babbel

University of Pennsylvania - The Wharton School - Finance and Insurance Departments; CRA International

Craig B. Merrill

Brigham Young University; Wharton Financial Institutions Center

Mark F. Meyer

Princeton Economics Group, Inc.

Meiring De Villiers

University of New South Wales (UNSW) - Faculty of Law

Date Written: undated

Abstract

This paper examines intra-day trading data from the inter-dealer broker market for U.S. Treasury securities and finds that there is a price pressure effect in the off-the-run Treasury market. As is well known, securities that would appear to be very close substitutes, i.e., on-the-run and off-the-run Treasury bonds, behave as if there is some degree of market segmentation. This is the first systematic study of the off-the-run Treasury note and bond market to investigate a price pressure effect using intra-day data. It analyzes price pressure through matched pairs of securities that differ only in liquidity.

Keywords: Price pressure, off-the-run Treasury bond and note, segmentation, liquidity

JEL Classification: G12, G14

Suggested Citation

Babbel, David F. and Merrill, Craig B. and Meyer, Mark F. and De Villiers, Meiring, The Effect of Transaction Size on Off-the-Run Treasury Prices (undated). Wharton Financial Institutions Center Working Paper No. 01-03, Available at SSRN: https://ssrn.com/abstract=259285 or http://dx.doi.org/10.2139/ssrn.259285

David F. Babbel

University of Pennsylvania - The Wharton School - Finance and Insurance Departments ( email )

215 Wakefield Road
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CRA International ( email )

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Craig B. Merrill (Contact Author)

Brigham Young University ( email )

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Wharton Financial Institutions Center ( email )

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Mark F. Meyer

Princeton Economics Group, Inc. ( email )

707 State Road, Suite 223
Princeton, NJ 08540
United States

Meiring De Villiers

University of New South Wales (UNSW) - Faculty of Law ( email )

Kensington, New South Wales 2052
Australia
(650) 725-8214 (Phone)
(650) 723-4107 (Fax)

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