Price Discovery and Volatility Spillover Effect in Treasury Bond Futures and Spot Markets: Evidence from China

Abstract

There is an increasing attention on dynamic relationship between treasury bond futures and spot markets in China. This study investigates price discovery and volatility spillover effect for treasury bond futures and spot markets in China by using 5 minutes high frequency data after China 5-year treasury bond futures trading. The estimation results suggest that, treasury bond futures plays an important role in price discovery function. Then, the results further confirm that treasury bond futures and spot markets exist volatility cluster. Meanwhile, we also find that the volatility spillover effect of treasury bond futures market to spot market is stronger than spot market to treasury bond futures market.