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Government Intervention and Strategic Trading in the U.S. Treasury Market
Social Science Research Network
We study the impact of outright (i.e., permanent) Open Market Operations (POMOs) by the Federal Reserve Bank of New York (FRBNY) on the microstructure of the secondary U.S. Treasury market. POMOs are trades in U.S. Treasury securities aimed at accomplishing the Federal Reserve's target level of the federal funds rate. Our analysis is motivated by a parsimonious model of speculative trading in the presence of a stylized Central Bank targeting the price of the traded asset. Contrary to previousdoi:10.2139/ssrn.1769773 fatcat:lbozatczenb2zmljg5kmk2k2ea