Macro News, Riskfree Rates, and the Intermediary

Albert J. Menkveld, Asani Sarkar, Michel van der Wel

Research output: Working paperProfessional

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''.
Original languageEnglish
Place of PublicationAmsterdam
PublisherTinbergen Instituut
Publication statusPublished - 2007

Publication series

NameDiscussion paper TI
No.07-086/2

Fingerprint

Intermediaries
News
Risk-free rate
Correlates
Futures markets
Surprise
Price changes
Order flow
Equity
Announcement effect
Profitability
Positive feedback trading
Cross section
Causality

Cite this

Menkveld, A. J., Sarkar, A., & van der Wel, M. (2007). Macro News, Riskfree Rates, and the Intermediary. (Discussion paper TI; No. 07-086/2). Amsterdam: Tinbergen Instituut.
Menkveld, Albert J. ; Sarkar, Asani ; van der Wel, Michel. / Macro News, Riskfree Rates, and the Intermediary. Amsterdam : Tinbergen Instituut, 2007. (Discussion paper TI; 07-086/2).
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Menkveld, AJ, Sarkar, A & van der Wel, M 2007 'Macro News, Riskfree Rates, and the Intermediary' Discussion paper TI, no. 07-086/2, Tinbergen Instituut, Amsterdam.

Macro News, Riskfree Rates, and the Intermediary. / Menkveld, Albert J.; Sarkar, Asani; van der Wel, Michel.

Amsterdam : Tinbergen Instituut, 2007. (Discussion paper TI; No. 07-086/2).

Research output: Working paperProfessional

TY - UNPB

T1 - Macro News, Riskfree Rates, and the Intermediary

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Menkveld AJ, Sarkar A, van der Wel M. Macro News, Riskfree Rates, and the Intermediary. Amsterdam: Tinbergen Instituut. 2007. (Discussion paper TI; 07-086/2).