We document that U.S. Treasury notes have a large proportion of zero returns in intraday intervals. The proportion is negatively correlated with other illiquidity measures implying that it does not necessarily capture illiquidity in the Treasury market. Decomposition analyses show that the relations of illiquidity with the proportion of zero returns is mainly driven by information asymmetry. We provide evidence that, given the prevalence of zero returns in Treasury notes, conventional jumpdetection methods are vulnerable to biases, leading to falsely identifying jumps. We propose a way to significantly improve the performance of jump-detection methods. Our results are robust to using models with stochastic volatility, lower sampling frequencies, data from electronic platforms, and quote midpoint returns.​

 Keywords: U.S. Treasury Notes; Zero Returns; Illiquidity; Stratified Bootstrapping; Monte Carlo Simulations; Jump-Identification Methods; Combined Methods

JEL Classification: G12; G14; G17