Questions tagged [bonds]
Bond markets and legal aspects of bonds. For government debt use the tag "government debt" unless the fact the the debt is in the form of bonds has significance.
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Why the US wont default on its foreign debt?
Ok sorry guys, this might be a "simple question", but simple questions can lead to big insights nevertheless. So I want to be an investor in the global stock market, and the biggest part of ...
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Relationship between bonds and interest rates
I read the following sentences from the book about the bond and interest rate.
First explanation goes like this:
When bond traders talk about yield they are usually referring to the YTM [Yield to ...
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What is a European Bond and how is its Yield Calculated?
I've become a bit confused at the concept of a European(or Eurozone) Bond. I can't seem to understand if this is just a weighted average of all the EuroZone countries government bond yields or if this ...
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What will happen to the selling prices of homes if commercial banks are mainly financed via bonds?
Someday people who have no need for loans might never have a need for a bank. For example, I might pre-pay for smartphone wireless data or pre-pay for coffee. If I owe you 5 USD perhaps someday I ...
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In bond markets, how does the number of banks in an underwriter syndicate grow as they share risk on larger deals?
If I look at a large collection of underwriter syndicates (underwriting green bond issuances), I can see there is, on the whole, a quadratic relationship between the value $v$ in USD that the ...
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Do banks influence each other's decisions to issue bonds, via a dependency graph?
This questions is about how to model the growth of a bond market. Consider a large set of banks, such as HSBC, BNP Paribas, etc, that can enter into syndication (i.e. join together in small groups) to ...
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Difference in spot rates and YTM for government bonds
I'm preparing for CFA L1. I assumed that 3 year spot rate of treasury to be equal to the YTM of 3 year treasury bond. The Schweser notes define spot rate as below
Yields on zero-coupon government ...
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Does issuing new bonds tend to raise yields empirically?
Suppose a national government issues new long dated bonds (say 30y) to finance capital investment which leads to higher long term growth. For convenience purposes lets assume everything here is zero ...
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What happens to Government Bonds after the Central Bank buys them? [duplicate]
When a central bank buys its own government bonds if the government owns the central bank the government essentially owes money to itself. In this situation what is done with the Bonds?
Are they re ...
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How can the Bank of England hold government debt through quantitative easing?
In this article the Economist writes about the BoE:
"in the past decade the bank’s successive rounds of quantitative easing (qe), whereby it creates new money to buy bonds, have left it holding ...
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How do governments rollover debt with bonds?
Here is a link to a article I've been reading:
https://www.stlouisfed.org/on-the-economy/2021/march/servicing-national-debt
In this article it says:
"While household debt must eventually be ...
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Do borrowing costs go down as a currency depreciates?
I was watching a video (https://youtu.be/2CVOfzuqoY4) and got very confused by the following sentence at 1:18:
"Usually when an established currency depreciates in value, borrowing costs in that ...
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meaning of face value as a percentage
What does it mean conceptually when the face value of a bond is equal to 100%? What does it mean when the FV is higher or lower 100%
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Eurodollar exercise
I'm trying to solve an exercise with Eurodollar and deliverable bonds.
This is the text in matlab
Basically there are two Bonds A and B and I need to find a few things about them. I use the formula ...
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portfolio consist of market indexes and bond indexes
I have homework that asked to analyze a portfolio which consist of different stock market indexes and bond indexes. I choose s&p 500 , Dow Jones and FTSE 100. I want to download the historical ...
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Getting a list of maturing bonds and notes
Let's say I want to know the net change in treasury securities on the TGA (treasury general account) for the date 2023-01-24.
I can go to the TreasuryDirect auction ...
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MMT and bond sales
Proponents of Modern Monetary Theory claim that bond sales are unnecessary and only help central banks set interest rates (which should be 0% anyway according to theory) and to provide safe interest-...
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Do U.S. Fed Interest Rate hikes and bond yields have a causal effect on each other?
I understand that there is a strong causal effect between U.S. Fed rate hikes or decreases on U.S. bond yields.
But does the relationship also go the other way, e.g. U.S. Fed hikes/decreases in ...
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Data for on/off-the-run treasury spreads
I would like to find the latest data for the spread between on-the-run and off-the-run treasuries. Not too picky about the tenor, maybe 2yrs and a few longer ones. I've come across a Fed paper and ...
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How does the central bank reduce money supply by selling bonds if the buyer of the bonds can use bonds as currency?
When the central bank wants to reduce the money supply, it can sell bonds. That way, the money supply reduces by the amount paid for the bonds. The buyer will have bonds instead of cash. The bonds can ...
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How do changes in US government bond yields impact the USD exchange rate?
I would like to understand how changes in US government yields impact the USD exchange against other major currencies, eg. the Canadian dollar or the yen.
My question assumes that the bond yields ...
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Price v return on gilts
Please forgive a very basic question from a non-economist, just trying to understand the current chaos in the UK markets. I gather that return on gilts (Government bonds) is in inverse proportion to ...
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Why is quantitative easing compared to "money printing"?
Context
Some questions on this site ask about the difference between "money printing" and "quantitative easing". I am experiencing some difficulties to understand what some of the ...
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Where Can I Get The US Treasury Near-term Forward Yield Spread Data
There have been several papers suggesting the inversion of the US treasury near-term forward yield spread is a better indicator of recessionary periods than that of the 10year/2year spread. We do this ...
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Does the initial bond price equal the face value?
When a bond is issued, does the buyer necessarily pay the face value? (I am not talking about consols or zero coupon bonds, just about an ordinary bond that, for simplicity, pays a coupon once a year.)...
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What are the practical applications of infinite series to Perpetuity?
I've already know that you can derive present value formula of a perpetuity through infinite series. But, one can argue that it's not really practical since you can just use the derived formula. So, I ...
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Why are U.S. treasury yields currently rising when the U.S. economy has likely entered a recession?
I understand that when investors’ confidence level is low, the demand for Treasuries will increase, hiking up Treasuries’ prices and lowering their yields. As a result, declining Treasury yields are ...
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Why are the yields on short-term bonds more volatile than those of long-term bonds?
Why do short term bonds have higher yield volatility but lower price volatility?
I believe because of what we call duration prices of long terms bonds are more volatile. But what does yield volatility ...
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Why Increase in Money Supply Reduces Interest Rate in Money Market?
I understand the fact the Increase in Money Supply reduces the interest rate in Money Market.
But these two explanations are confusing me a lot. I'm not able to understand which is correct.
Reason 1
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Treasury yield data
Interest rates on treasury.gov
This treasury.gov page lists the treasury security interest rates:
Interest rates on FRED
Graphs for each of the above treasury securities are also on FRED:
https://...
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Money-market model: Income rises, bond prices fall. But if income rises, saving increases — in bonds. So why does rising income lower bond prices?
According to the money market model that determines the equilibrium interest rate at which the demand for money in the economy equals the supply of money: when the money demand curve shifts right for ...
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Chain effects when Money Demand is greater than Money Supply
Here is an example graph of Money Market Equilibrium
The chain effects when interest rate is 8% are :
Excess Demand for Money => So, People would sell Bonds => Bond Prices goes Down => ...
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How does buying bonds decrease interest rate?
I am trying to understand how interest rates are influenced by central banks purchasing government bonds.
When Googling "how does buying bonds increase interest rate" I find the following:
...
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How to calculate specific treasury bond yields
I am having trouble finding the correct answer to this question:
Question: What would the yield be on a 1.75 percent, $1,000, 10 year Treasury bond if the market price of the bond was 950 dollars?
I ...
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Can the Equity Premium Puzzle apply equally to bonds?
Mehra and Prescott (JME, 1985) use the consumption-based asset price model to express the expected spread of equity returns over, e.g., a risk-free Treasury bond, as
\begin{equation*}
\mathbb{E}...
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Do bond prices increase due to increase in demand or increase in money supply?
When the Fed buys bonds, what will happen to the price of bonds in the open market?
Answer Key: Reward 1 point for stating the price will increase due to increase in money supply. (0 point is awarded ...
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How do perpetual bonds help the banks fulfill their capital requirements?
This is a follow-up question to Loans that don't have to be paid back (only the interest). In the Wikipedia article on perpetual bonds one reads
"Most perpetual bonds issued in the present day ...
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Differences between stocks and bonds
I just learned what bonds are. They seem similar to stocks, but different in key ways. I'd like to know all the ways. I'll list the differences that I currently believe they have. The only reason I'm ...
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Which sanction against Russia creates the least side effects on Western economies: SWIFT disconnect or denying selling of government bonds?
This NBC article suggests more fragility to sanction Russia by barring its central bank to sell government bonds as opposed to disconnecting it from the SWIFT, where there is virtually an EU + UK + US ...
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What is the Likelihood and Impact of US Treasury Bonds being Callable again?
Since 1985 US Treasury bonds have been issued as non-callable. I suspect this had significant impact on investors who wish buy treasuries and also impacted their hedging properties.
First, what ...
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Eurodollars - the real reason for the "Greenspan conundrum?"
While the jury seems to still be out on a similar question I posed earlier: Why did Greenspan think rate hikes would increase treasury term premiums?, I have recently begun entertaining an entirely ...
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Data on historical, cross-country nominal and real yield curves
Various central banks publish their fitted nominal yield curve estimates: the Fed, BOE, SNB, BOC, ECB (cf: Bundesbank), RBA, Russia, RBI.
(I couldn't find for BOJ; Brazil; BOK; or PBOC. Links for ...
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What are the consequences of an increase in interest rates for States?
As inflation is high, central banks such as the FED and the ECB hike rates.
One of the consequences is that the stock market is falling and in particular companies having a lot of debt (such as ...
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Why did Greenspan think rate hikes would increase treasury term premiums?
Greenspan once called long-term treasury yield's continued downtrend despite his multiple rate hikes a "conundrum."
The Fed has research on what is often called "Greenspan's Bond Yield ...
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Relationship between Treasury yield and dollar
I understand it is common sense that treasury yield goes up, the dollar goes up as well due to the fact that domestic/foreign money are attracted to the higher yield therefore they need to buy more US ...
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What would the theoretical ramifications of a mass sell-off of United States bonds be?
If a sovereign nation or nations were to sell off large amounts (say 30%) of United States bonds, what effects would it have on the United States' economy and debt situation? I am guessing that a mass ...
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Why do we have *daily* series of T-bill yields?
I understand that each week the US Treasury issues new T-bills at different maturities (1-month, 3-months, 1-year, etc). As far as I understand, this issuance happens every Tuesday. After the auction, ...
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Bond Price expression
I've researching some mathematical finance and I've stumbled upon something I can't seems to find sources on. I'm probably overlooking something, but I hope someone can enlighten me and give me some ...
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Why do bond prices reflect changing interest rates by the Fed if the bonds are already sold?
I was reading the "news" and saw this:
Inflation and the prospect of higher interest rates are prompting
investors to dump government bonds and reposition their stock
portfolios.
I'm ...
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Can the Federal Reserve permanently decrease money supply?
As far as I understand it, the primary way the Federal Reserve decreases the money supply is by selling bonds–the entities buying these bonds give up their cash for them and thus M0 is decreased. ...
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