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 |
| Number of pages | 15 |
| Journal | Journal of Financial Economics |
| Volume | 165 |
| Early online date | 13 Jan 2025 |
| DOIs | |
| Publication status | Published - Mar 2025 |
Bibliographical note
Publisher Copyright:© 2025
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Keywords
- Macro news
- Yield drift
- Bond supply
- Liquidity provision
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