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216 posts on "Financial Markets"

May 08, 2019

Ten Years Later—Did QE Work?



Ten Years Later—Did QE Work?


By November 2008, the Global Financial Crisis, which originated in the residential housing market and the shadow banking system, had begun to turn into a major recession, spurring the Federal Open Market Committee (FOMC) to initiate what we now refer to as quantitative easing (QE). In this blog post, we draw upon the empirical findings of post-crisis academic research–including our own work–to shed light on the question: Did QE work?

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April 03, 2019

Are New Repo Participants Gaining Ground?



LSE_Are New Repo Participants Gaining Ground?

Following the 2007-09 financial crisis, regulations were introduced that increased the cost of entering into repurchase agreements (repo) for bank holding companies (BHC). As a consequence, banks and securities dealers associated with BHCs, a set of firms which dominates the repo market, were predicted to pull back from the market. In this blog post, we examine whether this changed environment allowed new participants, particularly those not subject to the new regulations, to emerge. We find that although new participants have come on the scene and made gains, they remain a small part of the overall repo market.

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Posted by Blog Author at 7:00 AM in Dealers, Financial Markets, Repo | Permalink | Comments (1)

March 25, 2019

Deciphering Americans’ Views on Cryptocurrencies



LSE_2019_crytocurrencies-perception_martin_460_art

Having witnessed the dramatic rise and fall in the value of cryptocurrencies over the past year, we wanted to learn more about what motivates people to participate in this market. To find out, we included a special set of questions in the May 2018 Survey of Consumer Expectations, a project of the New York Fed’s Center for Microeconomic Data. This blog post summarizes the results of that survey, shedding light on U.S. consumers’ depth of participation in cryptocurrencies and their motives for entering this new market.

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March 06, 2019

Assessing the Price Impact of Treasury Market Workups



LSE_2019_Assessing the Price Impact of Treasury Market Workups

The price impact of a trade derives largely from its information content. The “workup” mechanism, a trading protocol used in the U.S. Treasury securities market, is designed to mitigate the instantaneous price impact of a trade by allowing market participants to trade additional quantities of a security after a buyer and seller first agree on its price. Nevertheless, workup trades are not necessarily free of information. In this post, we assess the role of workups in price discovery, following our recent paper in the Review of Asset Pricing Studies (an earlier version of which was released as a New York Fed staff report).

Continue reading "Assessing the Price Impact of Treasury Market Workups" »

Posted by Blog Author at 7:00 AM in Fed Funds, Financial Markets, Liquidity, Treasury | Permalink | Comments (1)

March 04, 2019

The Sensitivity of Long-Term Interest Rates: A Tale of Two Frequencies



LSE_The Sensitivity of Long-Term Interest Rates: A Tale of Two Frequencies

The sensitivity of long-term interest rates to short-term interest rates is a central feature of the yield curve. This post, which draws on our Staff Report, shows that long- and short-term rates co-move to a surprising extent at high frequencies (over daily or monthly periods). However, since 2000, they co-move far less at lower frequencies (over six months or a year). We discuss potential explanations for this finding and its implications for the transmission of monetary policy.

Continue reading "The Sensitivity of Long-Term Interest Rates: A Tale of Two Frequencies" »

Posted by Blog Author at 7:00 AM in Financial Markets, Macroecon, Monetary Policy | Permalink | Comments (1)

February 27, 2019

Global Trends in Interest Rates



LSE_2019_Global Trends in Interest Rates

Long-term government bond yields are at their lowest levels of the past 150 years in advanced economies. In this blog post, we argue that this low-interest-rate environment reflects secular global forces that have lowered real interest rates by about two percentage points over the past forty years. The magnitude of this decline has been nearly the same in all advanced economies, since their real interest rates have converged over this period. The key factors behind this development are an increase in demand for safety and liquidity among investors and a slowdown in global economic growth.

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February 01, 2019

At the New York Fed: Fourth Annual Conference on the Evolving Structure of the U.S. Treasury Market



The New York Fed recently hosted the fourth annual Conference on the Evolving Structure of the U.S. Treasury Market. The one-day event was co-sponsored with the U.S. Department of the Treasury, the Federal Reserve Board, the U.S. Securities and Exchange Commission (SEC), and the U.S. Commodity Futures Trading Commission (CFTC). This year’s agenda, which included a series of keynote addresses and expert panels, focused on four key topics: 1) analytical approaches to debt issuance, 2) clearing and settlement, 3) developments in cash and repo markets, and 4) analysis of transactions data. Previous conferences were held in November 2017, October 2016, and October 2015.

Continue reading "At the New York Fed: Fourth Annual Conference on the Evolving Structure of the U.S. Treasury Market" »

Posted by Blog Author at 7:00 AM in Financial Markets | Permalink | Comments (0)

January 11, 2019

Highlights from the Fourth Bi-annual Global Research Forum on International Macroeconomics and Finance



LSE_Highlights from the Fourth Bi-annual Global Research Forum on International Macroeconomics and Finance

Achieving and maintaining global financial stability has been at the forefront of policy discussions in the decade after the eruption of the global financial crisis. With the purpose of exploring key issues in international finance and macroeconomics from the perspective of what has changed ten years after the crisis, the fourth bi-annual Global Research Forum on International Macroeconomics and Finance, organized by the European Central Bank (ECB), the Federal Reserve Board, and the Federal Reserve Bank of New York, was held at the ECB in Frankfurt am Main on November 29-30, 2018. Participants included a diverse group from academia, international policy institutions, national central banks, and financial markets. Among the topics of discussion: the international roles of the U.S. dollar, the evolution of global financial markets, and the safety of the global financial system.

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Posted by Blog Author at 7:00 AM in Financial Markets, International Economics | Permalink | Comments (0)

December 05, 2018

Price Impact of Trades and Limit Orders in the U.S. Treasury Securities Market



LSE_Price Impact of Trades and Limit Orders in the U.S. Treasury Securities Market


It’s long been known that asset prices respond not only to public information, such as macroeconomic announcements, but also to private information revealed through trading. More recently, with the growth of high-frequency trading, academics have argued that limit orders—orders to buy or sell a security at a specific price or better—also contain information. In this post, we examine the information content of trades and limit orders in the U.S. Treasury securities market, following this paper, recently published in the Journal of Financial Markets and earlier as a New York Fed staff report.

Continue reading "Price Impact of Trades and Limit Orders in the U.S. Treasury Securities Market" »

Posted by Blog Author at 7:01 AM in Financial Markets, Liquidity | Permalink | Comments (0)

November 29, 2018

Breaking Down TRACE Volumes Further



Editor’s note: A previous version of this post contained a table that incorrectly reported second off-the-run trading volumes of 0.0 for TIPS and FRNs. The table has been corrected to show that these figures are not separately calculated but are instead included in deep off-the-run volumes. (January 8, 2019, 3:00 p.m.)

LSE_Breaking Down TRACE Volumes Further


Following an earlier joint FEDS Note and Liberty Street Economics blog post that examined aggregate trading volume in the Treasury cash market across venues, this post looks at volume across security type, seasoned-ness (time since issuance), and maturity. The analysis, which again relies on transactions recorded in the Financial Industry Regulatory Authority’s (FINRA) Trade Reporting and Compliance Engine (TRACE), sheds light on perceptions that some Treasury securities—in particular those that are off-the-run—may not trade very actively. We confirm that most trading volume is made up of on-the-run securities, especially in venues where the market has become more automated. However, we also find that daily average volume in off-the-run securities is still a meaningful $157 billion (27 percent of overall volume), and accounts for a large share (41 percent) of trading in the dealer-to-client venue of the market.

Continue reading "Breaking Down TRACE Volumes Further" »

Posted by Blog Author at 7:00 AM in Financial Markets | Permalink | Comments (0)
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Liberty Street Economics features insight and analysis from New York Fed economists working at the intersection of research and policy. Launched in 2011, the blog takes its name from the Bank’s headquarters at 33 Liberty Street in Manhattan’s Financial District.

The editors are Michael Fleming, Andrew Haughwout, Thomas Klitgaard, and Asani Sarkar, all economists in the Bank’s Research Group.

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