Jordan Brooks

AQR Capital Management
2 Greenwich Plaza
Greenwich, CT 06830

E-Mail: EmailAddress: hidden: you can email any NBER-related person as first underscore last at nber dot org
Institutional Affiliation: AQR Capital Management

NBER Working Papers and Publications

October 2018Post-FOMC Announcement Drift in U.S. Bond Markets
with Michael Katz, Hanno Lustig: w25127
The sensitivity of long-term rates to short-term rates represents a puzzle for standard macro-finance models. Post-FOMC announcement drift in Treasury markets after Federal Funds target changes contributes to the excess sensitivity of long rates. Mutual fund investors respond to the salience of Federal Funds target rate increases by selling short and intermediate duration bond funds, thus gradually increasing the effective supply to be absorbed by arbitrageurs. The gradual increase in supply generates post-announcement drift in longer Treasury yields, which spills over to other bond markets. Our findings shed new light on the causes of time-series-momentum in bond markets. A model in which mutual fund investors slowly adjust their extrapolative expectations of future short rates after a ta...
August 2016The Complexity of Liquidity: The Extraordinary Case of Sovereign Bonds
with Jacob Boudoukh, Matthew Richardson, Zhikai Xu: w22576
It is well-documented that government bonds with almost identical cash flows can trade at different prices. The explanation is that due to higher liquidity the most recently issued bond tends to trade at a premium to previously issued bonds. This paper analyzes the cross-section of bond spreads across developed countries over a 17-year time period. Indeed, liquidity has commonality across countries in the expected direction. However, the paper documents a novel finding that questions the standard view of liquidity. Under certain conditions, especially related to credit deterioration and flight to quality, new issue bond spreads tighten and can be negative. In other words, the liquid bonds become cheaper, not more expensive, relative to their less liquid counterparts. We offer an explanatio...

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