Yield drifts when issuance comes before macro news

Lou, Dong ORCID: 0000-0002-5623-4338, Pinter, Gabor, Üslü, Semih and Walker, Danny (2025) Yield drifts when issuance comes before macro news. Journal of Financial Economics, 165. ISSN 0304-405X

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Abstract

UK government bond yields tend to drift upwards before scheduled news such as monetary policy announcements and labour market data releases. This effect is particularly pronounced during periods of UK bond issuance and is linked to higher term premia. Financial intermediary constraints play a role as dealers avoid accumulating inventory in pre-news windows following issuance. The composition of liquidity providers also shifts: hedge funds buy a large share of the bond issuance outside pre-news windows, but more passive investors – such as foreign central banks and pension funds – provide liquidity in pre-news windows. We outline a simple model to rationalize these findings.

Item Type:	Article
Additional Information:	© 2025 Published by Elsevier B.V.
Divisions:	Finance
Subjects:	H Social Sciences > HG Finance
JEL classification:	G - Financial Economics > G1 - General Financial Markets > G11 - Portfolio Choice; Investment Decisions G - Financial Economics > G1 - General Financial Markets > G12 - Asset Pricing; Trading volume; Bond Interest Rates G - Financial Economics > G1 - General Financial Markets > G14 - Information and Market Efficiency; Event Studies D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D83 - Search; Learning; Information and Knowledge; Communication; Belief D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D84 - Expectations; Speculations
Date Deposited:	23 Jan 2025 15:27
Last Modified:	01 Feb 2025 18:06
URI:	http://eprints.lse.ac.uk/id/eprint/127045

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