Order flow and volatility: An empirical investigation

•Volatility dynamics in the 30-year US Treasury bond futures market are examined.•We develop a comprehensive framework for intraday return and volatility effects.•We study the order flow - volatility relationship and control for macro news.•Order flow is highly significant (both statistically and economically).•An interpretation of our findings is that private information matters for volatility.

We study the relationship between order flow and volatility. To this end we develop a comprehensive framework that simultaneously controls for the effects of macro announcements and order flow on prices and the effect of macro announcements on volatility. Using high-frequency 30-year U.S. Treasury bond futures data, we find a statistically and economically significant relationship between the absolute value of order flow and volatility. Moreover, this relationship is robust, inter alia, to a number of factors including the introduction of liquidity effects, use of data measured over a different frequency, and market conditions.