Yield drifts when issuance comes before macro news

Dong Lou; Gabor Pinter; Semih Üslü; Danny Walker

doi:10.1016/j.jfineco.2025.103993

Yield drifts when issuance comes before macro news

Dong Lou, Gabor Pinter^*, Semih Üslü, Danny Walker

^*Corresponding author for this work

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Research output: Contribution to journal › Journal Article › peer-review

Abstract

UK government bond yields tend to drift upwards before scheduled news such as monetary policy announcements and labour market data releases. This effect is particularly pronounced during periods of UK bond issuance and is linked to higher term premia. Financial intermediary constraints play a role as dealers avoid accumulating inventory in pre-news windows following issuance. The composition of liquidity providers also shifts: hedge funds buy a large 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 rationalize these findings.

Original language	English
Article number	103993
Journal	Journal of Financial Economics
Volume	165
DOIs	https://doi.org/10.1016/j.jfineco.2025.103993
Publication status	Published - Mar 2025

Bibliographical note

Publisher Copyright:
© 2025

Keywords

Bond supply
Liquidity provision
Macro news
Yield drift

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

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10.1016/j.jfineco.2025.103993

Cite this

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title = "Yield drifts when issuance comes before macro news",

abstract = "UK government bond yields tend to drift upwards before scheduled news such as monetary policy announcements and labour market data releases. This effect is particularly pronounced during periods of UK bond issuance and is linked to higher term premia. Financial intermediary constraints play a role as dealers avoid accumulating inventory in pre-news windows following issuance. The composition of liquidity providers also shifts: hedge funds buy a large 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 rationalize these findings.",

keywords = "Bond supply, Liquidity provision, Macro news, Yield drift",

author = "Dong Lou and Gabor Pinter and Semih {\"U}sl{\"u} and Danny Walker",

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year = "2025",

month = mar,

doi = "10.1016/j.jfineco.2025.103993",

language = "English",

volume = "165",

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T1 - Yield drifts when issuance comes before macro news

AU - Lou, Dong

AU - Pinter, Gabor

AU - Üslü, Semih

AU - Walker, Danny

PY - 2025/3

Y1 - 2025/3

N2 - UK government bond yields tend to drift upwards before scheduled news such as monetary policy announcements and labour market data releases. This effect is particularly pronounced during periods of UK bond issuance and is linked to higher term premia. Financial intermediary constraints play a role as dealers avoid accumulating inventory in pre-news windows following issuance. The composition of liquidity providers also shifts: hedge funds buy a large 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 rationalize these findings.

AB - UK government bond yields tend to drift upwards before scheduled news such as monetary policy announcements and labour market data releases. This effect is particularly pronounced during periods of UK bond issuance and is linked to higher term premia. Financial intermediary constraints play a role as dealers avoid accumulating inventory in pre-news windows following issuance. The composition of liquidity providers also shifts: hedge funds buy a large 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 rationalize these findings.

KW - Bond supply

KW - Liquidity provision

KW - Macro news

KW - Yield drift

UR - https://www.webofscience.com/wos/woscc/full-record/WOS:001419885400001

UR - https://www.scopus.com/pages/publications/85214672757

U2 - 10.1016/j.jfineco.2025.103993

DO - 10.1016/j.jfineco.2025.103993

M3 - Journal Article

SN - 0304-405X

VL - 165

JO - Journal of Financial Economics

JF - Journal of Financial Economics

M1 - 103993

ER -

Yield drifts when issuance comes before macro news

Abstract

Bibliographical note

Keywords

UN SDGs

Access to Document

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