The Federal Reserve Bank of New York works to promote sound and well-functioning financial systems and markets through its provision of industry and payment services, advancement of infrastructure reform in key markets and training and educational support to international institutions.
The Outreach and Education function engages, empowers and educates the Second District communities that the Bank serves, especially civic leaders, students, educators, small business owners, policymakers and the general public. It furthers the Bank's commitment to the region by listening to the communities we serve and leveraging our unique attributes to positively impact school and university programs, as well as analysis and research.
We identify striking adjustment patterns for price volatility, trading volume, and bid-ask spreads in the U.S. Treasury market when public information arrives. Using newly available high-frequency data, we find a notable lack of trading volume upon a major announcement when prices are most volatile. The bid-ask spread widens dramatically with price volatility and narrows just as dramatically with trading volume. Trading volume surges only after an appreciable lag following the announcement. High levels of price volatility and trading volume then persist, with volume persisting somewhat longer.
For a published version of this report, see Michael J. Fleming and Eli M. Remolona, "Price Formation and Liquidity in the U.S. Treasury Market: The Response to Public Information," Journal of Finance 54, no. 5 (October 1999): 1901-15.