Staff Reports

The Microstructure of the TIPS Market

December 2009Number 414
JEL classification: G14

Authors: Michael J. Fleming and Neel Krishnan

We characterize the microstructure of the market for Treasury inflation-protected securities (TIPS) using novel tick data from the interdealer market. We find a marked difference in trading activity between on-the-run and off-the-run securities, as in the nominal Treasury securities market. We find little difference in bid-ask spreads or quoted depth between on-the-run and off-the-run securities, in contrast to the nominal market, but we do find a sharp difference in the incidence of posted quotes. Intraday activity differs strikingly from the nominal market, with activity peaking in the mid-to-late morning. Announcement effects also differ from the nominal market, with auction results and consumer price index announcements eliciting particularly sharp increases in trading activity.

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For a published version of this report, see Michael J. Fleming and Neel Krishnan, "The Microstructure of the TIPS Market," Federal Reserve Bank of New York Economic Policy Review 18, no. 1 (March 2012): 27-45.