Surprises in Scheduled Releases: Why do They Move the Bond Market?

This paper analyzes the type of information contained in U.S. macroeconomic news releases in order to explain their relative impact on intraday T-bond futures prices quoted at the Chicago Board of Trade. It is well known that scheduled announce- ments affect prices as well as volatility in financial markets. While several studies try to evaluate which releases have a significant impact, considerably less effort has been devoted to the question what makes some releases important in contrast to others that seem to attract no attention at all. Instead of restricting the analysis to the question which releases produce significant coefficients in a regression framework, this paper investigates the information content of releases and the structure of the announcement cycle. This allows to derive and test some hypotheses concerning the relative importance of releases. In particular, it is hypothesized that market participants watch several aspects in macroeconomic reports in order to obtain a picture of the state of the economy. Then, the value of the information contained in a release should decrease with the number of previously released figures highlighting similar aspects. Thus, the price impact of a release should also decrease as the additional information contained in a release becomes smaller. For example, the demand in the housing sector for a given month may be derived from the reports on housing starts, new home sales and construction spending. But the price impact of these figures should decrease as one after another is announced since the additional information a report provides about the strength of demand in that sector becomes smaller and smaller.

Hess, Dieter (2000), Surprises in Scheduled Releases: Why do They Move the Bond Market?, ZEW Discussion Paper No. 00-61, Mannheim.