Price discovery in government bond markets

Valseth, Siri

doi:10.1016/j.finmar.2012.04.005

Cited by 23 publications

(15 citation statements)

References 14 publications

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“…Brandt and Kavajecz find that up to 26% of contemporaneous daily yield changes in the US Treasury market can be accounted for by interdealer order flow. Valseth (2013) finds similar results for the Norwegian government bond market. Evans and Lyons (2005) find that in foreign exchange markets order flows have significant out-of-sample power to forecast exchange rates out-of-sample and outperform both macroeconomic models and the random walk.…”

Section: Related Literaturesupporting

confidence: 64%

“…The predictions focus on a subsample, the interdealer market, for two main reasons. First, Valseth () documents that interdealer order flow is more informative than customer order flow. Second, Valseth () documents that informed dealers prefer the LOB to the OTC‐market because the immediacy of the LOB better protects their information.…”

Section: Data and Trading Environmentmentioning

confidence: 99%

“…Second, bond market order flows appear to contain heterogeneous private information about future bond prices as order flows of individual dealers vary in forecasting ability. As Valseth () argues, dealers appear to pick up different information which can be based on their interpretations of macroeconomic news, or on watching and engaging in trades. The results for excess returns indicate that the information in order flow is related to future bond risk premia.…”

Section: Introductionmentioning

confidence: 99%

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Challenging the spanning hypothesis at short horizons: Evidence from Norway

Valseth

2019

Journal of Forecasting

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The spanning hypothesis states that the yield curve reflects all available information about future yields. This paper challenges the hypothesis by investigating the predictive power of bond market order flow while controlling for principal components extracted from the current yield curve. The results show that order flows aggregated from interdealer trades in Norwegian government bonds can predict yield changes and excess returns both in‐sample and out‐of‐sample at the daily and weekly horizons. This suggests that bond dealers possess information about future bond yields that is not yet incorporated into the yield curve. Forecasts based on microstructure data can thus be valuable for short term investors.

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Section: Related Literaturesupporting

confidence: 64%

Section: Data and Trading Environmentmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Challenging the spanning hypothesis at short horizons: Evidence from Norway

Valseth

2019

Journal of Forecasting

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“…To illustrate, for banks in every size category, post‐trade returns are higher for aggressive than passive trades and the permanent price impacts implied by SVARs are larger for aggressive than passive trades. Valseth (2013) arrives at a similar conclusion with respect to dealers in the two‐tier Norwegian government bond market.…”

Section: Introductionmentioning

confidence: 67%

Price discovery in two‐tier markets

2020

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This paper examines the price discovery process in a two‐tier market, specifically the foreign‐exchange market. The goal is to identify the sources of private information and to gain insights into the process through which that information influences the market price. Using a transactions database that includes trading‐party identities, we show that sustained post‐trade returns rise with bank size, implying that larger banks have an information advantage. The larger banks exploit this information advantage in placing limit orders as well as market orders. We also show that the bank's private information does not come from their corporate or government customers or from some asset managers. Instead, the bank's private information appears to come from other asset managers, including hedge funds, and from the bank's own analysis.

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“…A study of Zaremba A. and Schabek T. is focused on seasonality in government bond returns [3]. Valseth S. is exploring price discovery in government bond markets using Norwegian data including trades from both tiers of the market and dealer identities [4]. Paper of Sola S. and Palomba G. examines the determinants of sub-national governments' risk premia in fiscal federations using secondary market data for the USA, Canada, Australia and Germany [5].…”

Section: Literature Reviewmentioning

confidence: 99%

Simulation of the Structure of Bond Issuer’s Obligations Fulfillment: A Case of Sub-Federal Bonds

Semernina

Yakunina

Ермакова

et al. 2019

Proceedings of the Fourth Workshop on Computer Modelling in Decision Making (CMDM 2019)

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Depreciable bonds issues can significantly expand the issuers' abilities to manage public debt. The purpose of the study is to suggest possible options for a model for fulfilling obligations by issuers of depreciable sub-federal bonds. The study was conducted using a discrete grouping constructed according to the criterion of the bonds face value repayment number. We propose a set of indicators to assess the issuers' possibilities to place depreciable sub-federal bonds in the Russian market. Our analyses showed that, during the period under review, the probability of successful depreciable bond issues placement in the sub-federal segment remained at a high level for bond issues with a nominal value of no more than 30.0 billion rubles and a maturity of no more than 3650 days. Deterioration of the bond market environment did not lead to significant changes in the structure of the bond issuers' obligations fulfillment. The most common was a model involving four repayments of the depreciable bonds nominal value.Index Terms-depreciable bonds, sub-federal bonds, simulation of bond issuance, structure of the bond issuers' obligations fulfillment, b ond market

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Price discovery in government bond markets

Cited by 23 publications

References 14 publications

Challenging the spanning hypothesis at short horizons: Evidence from Norway

Challenging the spanning hypothesis at short horizons: Evidence from Norway

Price discovery in two‐tier markets

Simulation of the Structure of Bond Issuer’s Obligations Fulfillment: A Case of Sub-Federal Bonds

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