Price discovery in the Italian sovereign bonds market: the role of order flow

Alessandro Girardi and Claudio Impenna ()
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Claudio Impenna: Bank of Italy

No 906, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: This paper analyses the price discovery process and the informational role of trading in the Italian wholesale secondary markets for Treasury bonds: the B2B MTS cash and the B2C BondVision trading venues. Using daily data for a representative set of fixed rate government bonds over the period January 2007 - February 2012, we find that the B2C dealer-to-customer market contributes to the process of price formation to a greater extent than the B2B interdealer platform. The informational role of trading is found to be considerable: order flow is a key variable in the process of price formation and appears to continuously act on a cross market basis. Moreover, the explanatory role of order flow turns out to be stronger when liquidity conditions are poorer.

Keywords: bonds markets; price discovery; order flow; market microstructure; financial crisis (search for similar items in EconPapers)
JEL-codes: G1 G2 (search for similar items in EconPapers)
Date: 2013-04
New Economics Papers: this item is included in nep-fmk and nep-mst
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Citations: View citations in EconPapers (11)

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http://www.bancaditalia.it/pubblicazioni/temi-disc ... 0906/en_tema_906.pdf (application/pdf)

Related works:
Working Paper: PRICE DISCOVERY IN THE ITALIAN SOVEREIGN BONDS MARKET: THE ROLE OF ORDER FLOW (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:bdi:wptemi:td_906_13

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