Template-Type: ReDIF-Paper 1.0
Author-Name: Dong Lou
Author-X-Name-First: Dong
Author-X-Name-Last: Lou
Author-Name: Gabor Pinter
Author-X-Name-First: Gabor
Author-X-Name-Last: Pinter
Author-Name: Semih Uslu
Author-X-Name-First: Semih
Author-X-Name-Last: Uslu
Author-Name: Danny Walker
Author-X-Name-First: Danny
Author-X-Name-Last: Walker
Title: Bond supply, yield drifts and liquidity provision before macroeconomic announcements
Abstract: UK government bond yields tend to rise in a two-day window before scheduled macroeconomic announcements such as labour market data releases and monetary policy news. This effect, particularly pronounced during UK bond issuances, is linked to higher term premia. Financial intermediary constraints play a role as dealers avoid accumulating inventory in pre-news windows with issuances. The composition of liquidity providers also shifts: hedge funds buy a larger share of the bond issuance outside pre-news windows, but more passive investors, such as foreign central banks and pension funds, provide liquidity in pre-news windows. We outline a simple model to rationalise these findings.
Creation-Date: 2024-12
File-URL: https://www.bis.org/publ/work1232.pdf
File-Format: Application/pdf
File-Function: Full PDF document
File-URL: https://www.bis.org/publ/work1232.htm
File-Format: text/html
Number: 1232
Keywords: macroeconomic announcements, interest rate drift, bond supply, liquidity provision
Classification-JEL: G11, G12, G14, D83, D84
Handle: RePEc:bis:biswps:1232