The Microstructure of the TIPS Market - FEDERAL RESERVE BANK of NEW YORK

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Staff Reports

The Microstructure of the TIPS Market

December 2009 Number 414

JEL classification: G14

Authors: Michael J. Fleming and Neel Krishnan

We characterize the microstructure of the market for Treasury inflation-protected securities (TIPS) using novel tick data from the interdealer market. We find a marked difference in trading activity between on-the-run and off-the-run securities, as in the nominal Treasury securities market. We find little difference in bid-ask spreads or quoted depth between on-the-run and off-the-run securities, in contrast to the nominal market, but we do find a sharp difference in the incidence of posted quotes. Intraday activity differs strikingly from the nominal market, with activity peaking in the mid-to-late morning. Announcement effects also differ from the nominal market, with auction results and consumer price index announcements eliciting particularly sharp increases in trading activity.

Available only in PDF PDF

19 pages / 408 kb

For a published version of this report, see Michael J. Fleming and Neel Krishnan, "The Microstructure of the TIPS Market," Federal Reserve Bank of New York Economic Policy Review 18, no. 1 (March 2012): 27-45.

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