When Delayed Spotting Meets Delayed Reporting: Distortions in the Corporate Bond Index Close

Authors

Andreas C. Rapp, Board of Governors of the Federal Reserve SystemFollow
Sean Seunghun Shin, Korea Advanced Institute of Science and Technology (KAIST)Follow
Xing (Alex) Zhou, Southern Methodist University (SMU) - Finance DepartmentFollow
Qifei Zhu, National University of Singapore (NUS)Follow

Publication Date

12-30-2025

Abstract

This paper provides the first systematic evidence that delayed Treasury spot trades (DTSTs) interacting with delayed trade reporting distort corporate bond pricing at the index close. Using proprietary MarketAxess data that identify DTSTs and record spread-agreement timestamps, we show DTSTs execute at stale prices, deviating from contemporaneous non-DTSTs by 19 bps. These trades mechanically bias end-of-day close-price estimates, with distortions that intensify with intraday volatility and comove across bonds. The resulting mispricing passes through to evaluated prices produced by leading bond index providers. Moreover, delayed reporting of DTSTs impairs price discovery, both after spread agreement and after the close.

Document Type

Article

Keywords

Delayed Treasury Spotting, Delayed Reporting, Corporate Bond Market, Index Close, Price Distortion, Price Discovery, Investment Fund, Index Provider, Benchmark Valuation

Disciplines

Finance

Source

SMU Cox: Finance (Topic)

Language

English