A High-Frequency Analysis of Trading Activity in the Corporate Bond Market: Macro Announcements or Seasonality?

Herein we explore whether macroeconomic announcements are a driving factor in the trading activity of US corporate bond market. Prior studies have documented a strong response of bond returns and interest rates to surprises in macroeconomic data in the US Treasury and Treasury futures markets. Likewise, studies have also documented that trading activity changes sharply, based on informational impulses provided by the release of economic data. We contribute to the existing literature by examining how both daily and intraday measures of trading activity are impacted by surprises in macro data. Our main findings are that the thinly-traded market for corporate bonds is largely unaffected by surprises in individual economic reports and that the market is dominated by day-of-week and time-of-day affects. The results stand in contrast to prior studies documenting increased financial market activity, such as Andersen, Bollerslev, Diebold and Vega (2003). The existence of intraday or “diurnal” trading patterns is consistent with earlier findings in Anderson and Bollerslev (1997,1998) studies with respect to intraday asset returns and volatility. Engle and Ng (1993) and Engle and Solkasa (2012)