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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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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3 votes
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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 the inflation is high, central banks such as the FED and the ECB are about to raise their rates. One of the consequence is that the stock market is falling and in particular companies having a lot ...
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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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Is the yield on high coupon-bonds more likely to be higher than on low-coupon bonds when the term structure is upward or downward sloping?

Currently I'm learning about the principles of corporate finance. More specifically I'm learning about valuing bonds. I have the follow question: Is the yield on high coupon-bonds more likely to be ...
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How the Fed and Treasury coordinate on liquidity management

On top of the Fed's USD120bn monthly treasury/MBS purchases, the drawdown in Treasury issuance over the last year has also added over USD1tr to the system. The premise is, faced with drawn-out debt ...
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Understanding Adam Smith's assertion about the incentives of receipt holders and bank money holders

At Chapter III of Book IV of The Wealth of Nations, Adam Smith makes the following assertion: Even in ordinary and quiet times, it is in the interest of the holders of receipts to depress the agio, ...
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Rationalising today's bond market and stock market

As of this writing, the 10-year T note yields 1.437%, on a steady 3-month downward trend (from 1.55-1.75% in recent months) while the S&P 500 is nearing all-time-highs. When these long-term bond ...
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How can I calculate the present value of a bond using YTM?

According to this article, the market value of a bond can be calculated using this equation: However, the YTM itself is dependent on market value: So, how can we calculate the market value of a bond ...
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How are sovereign bond interest rates determined?

They are a lot of questions about the price of a bond or its yield. Why do people buy negative interest rate bonds? How did Portugal draw down their interest rates on pubic debt? ... and so on Mine ...
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Are there any Sovereign Debt Guarantees, apart from those issued by the US?

The US has been undertaking an irregular form of foreign aid, Sovereign Bond Guarantees, which entails guaranteeing some of the public debt of their allies, source here: https://www.cgdev.org/blog/...
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Why do yield spikes reflect badly on tech stocks

Yield spikes are a reflection of market equity valuation. How I interpret this is that there’s real fear that some companies in the market won’t be able to pay their debt. Therefore, bonds trade cheap,...
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Meaning of high bond yields [duplicate]

Lately, rising longer-maturity bond yields have been in the news. Many people write as though the rising yields show that "the market" believes that the Federal Reserve will raise interest ...
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How does the treasury determine the rates of the bonds they sell?

My understanding is that price and yields are determined via supply and demand. How are the interest rates determined when the bonds are auctioned off?
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What is the mechanism for when the fed purchases a gov't or corporate bond from a non bank?

My understanding is when the fed buys a bond from a bank they use bank reserves (bank reserves are swapped for a bond). How does the transaction differ when a non bank (ex hedge fund) is involved?
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Is it possible to peg a cryptocurrency to a stock or bond index?

What if the creators of a new cryptocurrency gave out new units of the cryptocurrency in exchange for shares of a stock or bond index fund, held these shares in reserves, and allowed owners of the ...
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Why is market absorption of issued US Treasury Bonds (with the Fed purchase plan) a problem?

Financial market reports suggest that there are uncertainties about the Federal Reserve's ability to absorb new US Treasury Bonds issued in larger quantities to support the US government's growing ...
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How do U.S. treasury yields impact yields of other sovereign debt markets?

I read somewhere that when the U.S. Treasury yields rise, it will also have a "gravitational pull" on yields of other sovereign debt markets. For example, when the U.S. Treasury yields rise, ...
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1 answer
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Is the debt owed to resourceful producers by resourceless consumers practically irrepayable?

Here is my argument for the debt owned by resourceless consumers to resourceful producers (as currency, bonds, loans, or other means). Is it correct? If not, where am I going wrong? Economic value is ...
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Understanding the “Treasury auction results” press release

This is the press release for a recent 30-Year bond auction results: https://www.treasurydirect.gov/instit/annceresult/press/preanre/2020/R_20201112_5.pdf I cannot figure out how the price is ...
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1 vote
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How does QE effect the collaterals?

For instance, the ECB accepts green bonds as collateral. And also they are more likely to include green bonds in a QE program. Does this face make a green bond more valuable? How would it work in a ...
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4 answers
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What happens when government bonds purchased as part of central bank quantitative easing (QE) reach maturity?

Does the central bank ask the government to pay or are they rolled over?
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Why would governments sell bonds when the economy is in recovery? [closed]

China confident of meeting 2020 fiscal targets, CGTN, 7 August 2020. The article states that China is selling "special government bonds". Why do this? Especially when economy is just ...
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1 answer
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How does buying bonds reduce bond yield?

I read that Japan rapidly increased the printing of Yen and used the money to buy government bonds. How did this action reduce the yields of their government bonds and prevent them from having a debt ...
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1 answer
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Does bond yield always equal the prevailing bank interest rates?

Does a bond's yield (principal and coupon rate) always equal the bank interest rate?
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2 answers
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Why did the US credit rating downgrade in 2011 decrease US government bond yields?

I'm not sure how bond yields were decreased by the US credit rating downgrade in 2011. Since the credit rating is down, shouldn't the yields increase since the US government wants to attract more ...
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2 answers
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Was there a drop in liquidity in the corporate bond market during the Global Financial Crisis?

It is often said that the increase in the perceived default risk led to a fall in the demand for the corporate bonds. This led to the fall in their prices and hence, their interest rates rose ...
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Why are the YTMs of TIPS of longer maturities more sensitive to current interest rates and inflation rates?

According to this website, the yields of TIPS of longer maturities are greater than that of TIPS of shorter maturities. It seems counterintuitive since yields of longer-maturity bonds, which are based ...
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Even at the break-even inflation rate, isn't the YTM of a TIPS greater than that of a normal treasury bond?

At a the break-even rate of inflation, the semi-annual interest payments from a TIPS and a normal government bond would be roughly equivalent. However, the principal amount originally invested in the ...
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1 vote
2 answers
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How does the Fed's stimulus push stocks markets higher?

I read that the Fed’s stimulus last March has contributed to a spectacular rally in stock markets. And indeed S&P500 has increased a lot since March. But how does the mechanism work? How does the ...
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Does China issue treasury bonds too?

The USA is issuing a lot of treasury bonds and investors are buying it. But does China issue such bonds too? If yes, then how many such bonds did they issued and who are the largest owners of those ...
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Are coupons all semi-annual?

How do coupons get priced in together?
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How do you benefit from a fall in interest rates in general as a creditor of public bonds?

I’m reading about England debt in 1819 and how interest rate benefited its creditors. The country had a public debt of more than 250% of the GDP. With peace at last achieved, London is faced with a ...
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How could Euro bonds serve as a "safe haven" asset in the long run?

The German Bund has been the major safe-haven asset in the Eurozone despite the advent of the Euro. However, I noticed that there is mounting anticipation around a potential 750 billion worth of Euro ...
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3 votes
2 answers
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Are quantitative easing and helicopter cash really different tactics? And how does QE relate to Modern Monetary Theory?

I've been trying to get a clear understanding of exactly what economists mean by Quantitative Easing (QE). It seems to me that different people mean different things by it. I find simplistic analogies ...
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