An examination of the impact of macroeconomic news on the spot and futures treasuries markets

✍ Scribed by Marc W. Simpson; Sanjay Ramchander

• Publisher: John Wiley and Sons
• Year: 2004
• Tongue: English
• Weight: 154 KB
• Volume: 24
• Category: Article
• ISSN: 0270-7314
• DOI: 10.1002/fut.10132

✦ Synopsis

Abstract

In this study we analyze the reaction of daily cash and futures prices for several Treasury securities to the
release of U.S. macroeconomic news. Some important results are reported. First, consistent with the notion of
market integration, the futures market is found to be cointegrated with the corresponding cash market. Second, of
the 23 types of periodic macroeconomic announcements, 19 of them have a significant influence on either the cash or
futures prices. Most notably, surprises in nonfarm payroll and Treasury budget significantly influence the cash and
futures market across the entire maturity spectrum. Third, consistent with the Fisher and real activity hypotheses,
macroeconomic news that conveys higher inflation and/or economic growth has a negative influence on cash and
futures prices. Finally, hedging with Treasury futures appears to offer investors protection from
inflation‐related fluctuations in interest rates, but not against fluctuations arising due to variations in
real output. Some important policy implications of the results are offered. © 2004 Wiley Periodicals, Inc. Jrl
Fut Mark 24:453–478, 2004