Wards Finance Seminar Series.The Evolution of Treasury Market Liquidity: Evidence from 30 Years of Limit Order Book Data
Published: 16 January 2026
25 March 2026. Michael Fleming, Federal Reserve Bank of New York.
Michael Fleming, Federal Reserve Bank of New York.
"The Evolution of Treasury Market Liquidity: Evidence from 30 Years of Limit Order Book Data"
Wednesday 25 March 2026. 15:00-16:30 Room 386 Adam Smith Business School Building
Abstract
This paper uses order book and transactions data from the U.S. Treasury securities market to calculate daily liquidity measures for a thirty-year sample period (1991–2021). We then construct a daily index of liquidity from bid-ask spreads, quoted depth, and price impact, reflecting the fact that the varying measures capture different aspects of market liquidity. The index is highly correlated with liquidity proxies proposed in the literature, but is more sensitive to short-term drivers of liquidity, suggesting that it better measures contemporaneous liquidity (as opposed to expected future liquidity). In March 2020, in particular, the index peaks at a level commensurate with that seen during the 2007–09 global financial crisis, whereas the liquidity proxies peak at much lower levels. Significant drivers of market liquidity include announcements, implied volatility, and the extent to which high-frequency traders are present in the market.
Bio
Michael Fleming is the head of Capital Markets and a co-editor of the Liberty Street Economics blog. His primary research interests are market microstructure, financial intermediation, and monetary policy. His recent work examines Federal Reserve liquidity provision during the pandemic, the evolution of Treasury market liquidity and its drivers, and the effects of market structure changes on intermediaries and market quality. Michael joined the New York Fed as an economist in 1994. He received a Ph.D. in Business Economics from Harvard University in 1994 and a B.A. in Economics from Colby College in 1988. He has taught fixed income at NYU Stern.
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First published: 16 January 2026