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Macro News, Riskfree Rates, and the Intermediary

Author

Listed:
  • Albert J. Menkveld

    (VU University, Amsterdam)

  • Asani Sarkar

    (NY FED)

  • Michel van der Wel

    (VU University, Amsterdam)

Abstract

Signed customer order flow correlates with permanent price changes in equity and nonequity markets. We exploit macro news events in the 30Y treasury futures market to identify causality from customer flow to riskfree rates. We remove the positive feedback trading part and establish that, in the 15 minutes subsequent to the news, intermediaries rely on customer orders to determine a substantial part of the announcement's effect on riskfree rates, i.e. one-third relative to the instantaneous effect. They appear to benefit from privately observing informed customers, as, in the cross-section, their own-account trade profitability correlates with access to customer flow, controlling for volatility, competition, and the macro ``surprise''.

Suggested Citation

  • Albert J. Menkveld & Asani Sarkar & Michel van der Wel, 2007. "Macro News, Riskfree Rates, and the Intermediary," Tinbergen Institute Discussion Papers 07-086/2, Tinbergen Institute.
    • Handle: RePEc:tin:wpaper:20070086
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    discount rate; macroeconomic announcements; customer order flow; intermediary; treasury futures;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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