Trading activity in benchmark U.S. Treasury securities now concentrates on the last trading day of the month. Moreover, this stepped-up activity is associated with lower transaction costs, as shown by a smaller price impact of trades. We conjecture that increased turn-of-month portfolio rebalancing by passive investment funds that manage relative to fixed-income indices helps explain these patterns.
Trading Volume Concentrates on the Last Day of the Month
Since 2020, trading activity in benchmark Treasury notes and bonds has been roughly 33 percent higher on the last trading day of the month, on average, as shown in the chart below.
Trading Volume Is Higher on the Last Day of the Month
Notes: The chart shows the average percent deviation of trading volume on each day of the month as compared to…
