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End‑of‑Month Liquidity in the Treasury Market

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Abstract

Trading activity in benchmark U.S. Treasury securities now concentrates on the last trading day of the month. Moreover, this stepped-up activity is associated with lower transaction costs, as shown by a smaller price impact of trades. We conjecture that increased turn-of-month portfolio rebalancing by passive investment funds that manage relative to fixed-income indices helps explain these patterns.

Suggested Citation

  • Henry Dyer & Michael J. Fleming & Or Shachar, 2024. "End‑of‑Month Liquidity in the Treasury Market," Liberty Street Economics 20240924, Federal Reserve Bank of New York.
    • Handle: RePEc:fip:fednls:98822
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    File URL: https://libertystreeteconomics.newyorkfed.org/2024/09/end-of-month-liquidity-in-the-treasury-market/
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    More about this item

    Keywords

    end of month; Portfolio rebalancing; index; Treasury securities;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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