Price discovery in government bond markets

This paper investigates the process of price discovery in government bond markets.By using a new data set including interdealer trades, customer trades, trade types anddealer identities, the paper explores the role of dealers in the price formation processand seeks to identify their sources of information. At the aggregate level the resultsshow that interdealer order flow is highly informative, explaining one fourth of daily yieldchanges, while customer order flow has little explanatory power. At the individual dealerlevel the results reveal that dealers contribute differently in the price discovery process...