The price effects of the recent change in the Japanese government bond market

Abstract

This paper investigates the change of price movements in the benchmark issue and the current issue at the Japanese government bond market. The trading volume of the benchmark issue was more than 90 % in 1992, but less than 20 % in 1998. This drastic change inspired the examination of the price movements. The relationship between those two price series is analyzed by the regression analysis during three sub-periods from 1990 to 1999. The results are not clear though there are some differences between the closing·to·closing series and the opening·to·opening series and also between the closing·to·opening non ·trading period series and the opening·to·closing trading period series. In the next step, the variance ratios of each sub-period a re examined. The daily price movements for the benchmark issue become less noisy. Furthermore, the opening·to·closing trading period includes more noise than the closing·to·opening non·trading period in the benchmark issue.