Euro area sovereign yield dynamics: the role of order imbalance
In: Working paper series 385
In: ECB-CFS research network on capital markets and financial integration in Europe
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In: Working paper series 385
In: ECB-CFS research network on capital markets and financial integration in Europe
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In: Tinbergen Institute Research Series 276
In: Research series
In: Journal of political economy, Band 130, Heft 2, S. 426-461
ISSN: 1537-534X
In: Annual Review of Financial Economics, Band 13, S. 153-178
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In: Journal of Political Economy (forthcoming)
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Working paper
In: Annual Review of Financial Economics (https://doi.org/10.1146/annurev-financial-100520-100321, Forthcoming).
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In: Review of Financial Studies 30 (2017), 1188--1228
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In: Management Science, Forthcoming
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Working paper
In: Forthcoming Review of Finance
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In: China economic review, Band 20, Heft 1, S. 29-45
ISSN: 1043-951X
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Working paper
We study sovereign yield dynamics and order flow in the largest euro-area treasury markets. We exploit unique transaction data to explain daily yield changes in the ten-year government bonds of Italy, France, Belgium, and Germany. We use a state space model to decompose these changes into (i) a "benchmark" yield innovation, (ii) a yield spread common factor innovation, (iii) country-specific innovations, and (iv) (transitory) noise. We relate changes in each of these factors to national order imbalance and find that Italian order imbalance impacts the common factor innovation, French and Belgian order imbalance impact country-specific innovations, and German order imbalance only changes yields temporarily. Order imbalance, however, does not have explanatory power for the most important factor: benchmark yield innovations.
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In: Review of Financial Studies (forthcoming)
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Working paper