Bulletin – June Quarter 2012 Liquidity in the Australian Treasury Bond Futures Market Abstract

Australian Treasury bond futures contracts are used by market participants to manage interest rate exposures. Relative to other financial instruments, the market generally has high turnover and low transaction costs. However, the global financial crisis saw a decline in liquidity, with market participants reacting to increased volatility by trading smaller parcels more frequently, and at a higher cost. More recently, liquidity in the market has improved. Intraday data suggest that liquidity is deepest following the opening of the market, and that liquidity is affected by the release of economic and financial news, particularly the announcement of the outcome of Reserve Bank Board meetings.

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