Liquidity measures throughout the lifetime of the US Treasury bond

We examine the price impact of different components of liquidity throughout the lifetime of the U.S. Treasury bond. Using the GovPX dataset, we provide a comprehensive empirical analysis of the impact of several liquidity proxies on the relative liquidity premium of these securities. The findings show that the liquidity premium has a deterministic main age-based component. This aging effect extends beyond the simple on-the-run/off-the-run effect. There is also a stochastic component of the liquidity premium that depends on the unexpected value of microstructure-based liquidity proxies and the current market and bond-level conditions. (C) 2017 Elsevier B.V. All rights reserved.