The impact of economic news on bond prices: Evidence from the MTS platform

Abstract

Although there is an extensive literature on the impact of macroeconomic announcements on asset prices, the bond market has received less attention than the foreign exchange and equity markets, even less if we consider the European market. This paper uses high-frequency intra-day data over a three-year period to investigate the impact of regularly scheduled macroeconomic news and monetary policy announcements on the returns of the Italian government bond market, the largest one in the Euro-zone. With respect to the previous papers, we use a much broader set of announcements, sixty-eight, and a relatively novel dataset (MTS). We find that twenty-five news have a significant impact on bond returns and that almost all announcements are incorporated into prices within twenty minutes from the release.JEL codes C5; G10; G14

Does It Matter If Statistical Agencies Frame the Month’s CPI Reporton a 1-Month or 12-month Basis?

“…More recent papers, able to take advantage of larger and higher-frequency datasets, have similarly found interest rates rising or bond prices falling in reaction to news of higher inflation or stronger economic growth. They include Fleming and Remolona (1999), Goldberg and Leonard (2003), Ehrmann and Fratscher (2005), Gurkaynak, Sack and Swanson (2005), Andersen, Bollerslev, Diebold and Vega (2007), Faust, Rogers, Wang and Wright (2007), Paiardini (2014), Gilbert, Scotti, Strasser and Vega (2016) and Strasser (2017), among others.…”

Macroeconomic News and Price Discovery in Indonesian Government Bond Market

“…Early researches capture the impact of macroeconomic news announcements on bond returns by comparing returns on days when there were macroeconomic news announcements and days when there wasn't, such as Fleming and Remolona (1999) and Andritzky et al (2007). Recent studies use 'surprise' effect of macroeconomic news announcements and use forecast survey from Money Market Services (MMS) International or Bloomberg as proxy of market expectation, such as Balduzzi et al (2001), Goeij and Marquering (2006), Brenner et al (2009), Nowak et al (2011), and Paiardini (2014. Balduzzi et al (2001), using intraday data of US Treasury Bill and Treasury Note, find that several announcements affects bond price, but in different manner according to maturity of the bond.…”

“…Brenner et al (2009) study the impact of macroeconomic news on US Financial markets find that the news surprises have significant impact on all assets type including government bond, and especially sensitive for 'good' news surprise. Outside US, Paiardini (2014) study the effects of macroeconomic news on Italian government bond. The study use domestic, neighboring countries, regional and global macroeconomic news surprises.…”

“…The new information in macroeconomic news is proxied by 'surprise' following common literature by Balduzzi et al (2001), Nowak et al (2011) and Paiardini (2014). This surprise is the difference between actual macroeconomic news and the expectation of the market.…”

“…This surprise is the difference between actual macroeconomic news and the expectation of the market. For the expectation of the market I use Bloomberg forecast survey to market analysts which is also used in many previous studies such as Nowak et al (2011) and Paiardini (2014). This survey results is released prior to the scheduled date of the news.…”