Treasury Yield Moves Around Federal Reserve Announcements

Summary

The document asks how much capital or trading volume is needed to move the 10-year Treasury yield by 10 basis points. It frames the question around a recent period of Federal Reserve rate hikes, noting that the 3-month to 10-year yield curve stayed inverted and that the author observed 10-year yields rising before Fed announcements and falling during them. The author also asks whether historical data can show Treasury market volumes during announcement hours.

These are observations and research questions rather than a tested explanation of price elasticity. The document provides no volume data, estimates, empirical method, or evidence establishing that Treasury buying caused the observed yield moves or supported equities. Its suggestion of possible manipulation is presented as a concern, not a demonstrated finding. Readers should treat the announcement pattern as a hypothesis to investigate and would need event-level yield and trading-volume data to estimate market impact.

Key ideas

• The author asks what trading volume could move the 10-year Treasury yield by 10 basis points.
• The document reports an observed pattern of yields rising before and falling during Fed announcements.
• It notes that the 3-month to 10-year yield curve remained inverted during the rate-hike period discussed.
• The document offers no market-impact estimate or evidence that trading caused the observed pattern.

Tags

# What is the Price Elasticity of the 10 year Treasury Market?


# What is the Price Elasticity of the 10 year Treasury Market?












At the near culmination (allegedly) of the fastest prolonged Fed Funds Rate hike episode in US history, we find two unusual things:

- the overall yield curve between 3-month and 10 year Treasuries has consistently remained inverted during the hikes.

- According to Bloomberg ( https://archive.is/IHjcM ), the rate hike live announcements by Fed Chair Powell have been unabashedly bullish for both equities and 10 year Treasuries, during the hour of the Fed's announcement!

Specifically, for the 10yr Treasury, we see the following pattern:

- First the 10yr yield rises pre-announcement,

- Then, during the announcement the yield has consistently fallen. The graph below shows the cumulative effect of announcement after announcement, as if they were contiguous.

My question is how much money does it take, in 2023, to move the 10 year yield by 10bps? Or if there are any references to historical data showing 10yr treasury market volumes during the hours of Fed announcements, that would be much appreciated.

Note: my question is in the context of the unusual recent rate hike cycle, with concern about manipulation, given that money thrown at the 10 year market helps maintain equities buoyant (because equity markets price off of the 10yr market, generally).

Shown in full with attribution under the source's licence. Licence: CC BY-SA 4.0 (Stack Exchange)

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.