Macro announcements change the equilibrium risk-free rate. We find that Treasury prices reflect part of the impact instantaneously, but intermediaries rely on their customer order flow after the announcement to discover the full impact. This customer flow informativeness is strongest when analyst macro forecasts are most dispersed. The result holds for 30-year Treasury futures trading in both electronic and open-outcry markets. We further show that intermediaries benefit from privately recognizing informed customer flow, as their own-account trading profitability correlates with customer order access. © Copyright,
ERIM Top-Core Articles
Journal of Financial and Quantitative Analysis
Erasmus Research Institute of Management

Menkveld, A.J, Sarkar, A, & van der Wel, M. (2012). Customer order flow, intermediaries, and discovery of the equilibrium risk-free rate. Journal of Financial and Quantitative Analysis, 47(4), 821–849. doi:10.1017/S0022109012000245