Microstructure

Lou, Yan, and Zhang found that Treasuries cheapen in the days before an auction and recover after it. In Treasury futures from 2010 to 2026, the daily gaps around the late-month auctions line up with the month-end rally, and a trade on the month-end calendar alone did better. Intraday, the futures still move by about half a basis point of yield around the close of bidding, but no intraday trade we tested shows a reliable profit after a tick of cost per round trip.

Traders treat round prices as support and resistance. In 16 years of one-second data in six CME futures, price that reaches a round level goes through it more often than price that reaches an ordinary one, and least often turns back one tick past it. Approaches to round levels also seem to stall short of them a little more often, though that result is less firm. We checked the findings tick by tick, against placebo levels, and a dozen other ways.