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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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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, ...
Paul Razvan Berg's user avatar
3 votes
2 answers
214 views

Is the money market model based on assumption of no interest rate targeting on the part of the central bank?

This is quote from Gregory Mankiw's macroeconomics text about mechanism of formation of the interest rate in the money market model: How does the interest rate get to this equilibrium of money supply ...
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3 votes
1 answer
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What is the effect on GDP when foreigners buy lots of domestic bonds?

I am trying to figure out the effect on GDP of foreigners buying lots of domestic bonds. From what I understand, when foreigners buy lots of domestic bonds: They need to convert their foreign ...
Flux's user avatar
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2 votes
1 answer
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Is it fair to compare 1950 US economy to 2016 US economy?

In the last 2 days, bond market has declined a bit. All major news outlets published articles like these: Can We Ignore the Alarm Bells the Bond Market Is Ringing? Such an event in bond market ...
zengr's user avatar
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2 votes
1 answer
63 views

negative interest rate lending ripple effects

I was attempt to describe the ramifications of negative interest rates across benchmarks. I can foresee the business practice changes amongst holders of government bonds, savings accounts, ...
CQM's user avatar
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1 vote
0 answers
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Bond syndicates and systemic risk

I'm looking at both bond syndicates (groups of banks underwriting bond issuance), and also the holders of those bonds (groups of investors that hold those bonds for some time, potentially selling them ...
apg's user avatar
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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 ...
Arash Howaida's user avatar
1 vote
0 answers
23 views

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 ...
Oikosmonaut's user avatar
1 vote
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68 views

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}...
user41062's user avatar
1 vote
0 answers
90 views

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 ...
user110391's user avatar
1 vote
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35 views

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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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 ...
Arash Howaida's user avatar
1 vote
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48 views

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 ...
Arash Howaida's user avatar
1 vote
0 answers
45 views

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 ...
Arash Howaida's user avatar
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Interest rate, bond problem

I am trying to solve the following problem: Debtor issued a bond on 20 000€ (including interest rate) with maturity rate of 8 months and interest rate of 8% per annum. Month later, the creditor ...
Daniel P.'s user avatar
1 vote
0 answers
13 views

Bond prices and Brexit

Hope this isn't too simple a question. I read an article that stated that the UK government and EU have reached a draft agreement for a Brexit deal, leading to the following market movements after ...
Rfh's user avatar
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How to determine the default probability of a county in a bond that is not in its native currency?

Consider the following case: Country P uses the currency Euro and gives p percent interest on a one year bond issued in Euro. Country Q uses the currency TL and gives q percent interest on a one ...
Our's user avatar
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318 views

How will perpetual floating rate bonds respond to tighter capital requirements?

Floating-rate perpetual bonds will tend to rise or hold value with increasing market interest rates (in contrast to fixed rate bonds, which tend to exhibit and inverse relationship between price and ...
quant's user avatar
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0 answers
69 views

Bonds with embedded options pricing via binomial model

Notation: t - time; G(t) - zero-coupon yield curve; $r$, $r_d$, $r_u$ - interest rates. The task is to find market price of a bond for today, while knowing the price of a number of other bonds. ...
Binosaur's user avatar
1 vote
0 answers
52 views

Data source for a corporate bond yield curve?

Yield curves are a valuable tool for economic analysis. It is particularly interesting to analyse the difference between Government Debt yields and Corporate Debt yields (credit spreads). This gives ...
DVCITIS's user avatar
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1 answer
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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 => ...
Rakesh Poddar's user avatar
1 vote
2 answers
303 views

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 ...
Flux's user avatar
  • 553
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0 answers
13 views

Bond Futures Invoice Price vs Futures Price

If I buy a bond Futures I have to pay the current Futures Price but at settlement day I pay the invoice price(=settlement price on position day*conversion factor + accrued interest) which is actually ...
math123's user avatar
0 votes
1 answer
78 views

Why is the portfolio weight of the risk-free asset capped at 1?

I am reading Investment Science by David Luenberger, and in it he creates a portfolio with a risk-free asset and a risky asset. α is the weight of the risk-free asset, and he sets α ≤ 1. Why is that? ...
wwjwjwjwj's user avatar
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21 views

How much of a bond do the market makers typically hold?

Market makers facilitate a bond issuance by providing somewhere to both buy and sell the bonds of a bond issuance. I'm trying to understand how the market makers (i.e. the security underwriters such ...
apg's user avatar
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0 answers
28 views

How important is the underwriter syndicate of a bond?

When it comes to bond issuance, how crucial is the involvement of an underwriter syndicate in the process? They seem it be a bit like "hit-and-run" agents who facilitate the issuance, but ...
apg's user avatar
  • 123
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0 answers
85 views

In an inverted yield curve, why do short term yields go higher?

I understand the yield curve and why short term bonds have lower yields than long term bonds. I also understand why in an inverted yield curve, long term bonds have lower yields -- it is because ...
programmer's user avatar
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0 answers
14 views

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 ...
apg's user avatar
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0 answers
50 views

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 ...
apg's user avatar
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1 answer
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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 ...
Arvinth's user avatar
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37 views

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 ...
ayazasker's user avatar
0 votes
0 answers
81 views

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 ...
Lowell0803's user avatar
0 votes
0 answers
175 views

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 ...
Fred Calvert-Lewin's user avatar
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0 answers
53 views

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, ...
Raul Guarini Riva's user avatar
0 votes
0 answers
28 views

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 ...
Tan Yong Boon's user avatar
0 votes
0 answers
388 views

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 ...
Pascal Dufresne's user avatar
0 votes
0 answers
59 views

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 ...
Joe Jobs's user avatar
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0 votes
0 answers
32 views

In credit easing, how do central banks avoid allegations of unequal treatment?

In credit easing, central banks purchase private assets such as corporate bonds. How do central banks choose which corporate bonds to buy? If the central bank buys bonds of one company but not those ...
Flux's user avatar
  • 553
0 votes
2 answers
597 views

Correlation between nominal bond returns and growth

I read the following passage and the bolded section has me confused: In theory, assets earn a low (or negative) risk premium if they tend to perform well when the economy is weak. When growth ...
Jr Analyst's user avatar
0 votes
0 answers
34 views

Why don't we have many-to-many lending yet?

Trying to research this for some time, but can't really find anything relevant. As it currently stands borrowing can be one-to-one: 1 customer borrows money from 1 bank. And can be one-to-many: 1 ...
Calmarius's user avatar
  • 347
0 votes
1 answer
60 views

Duration - why do we measure it the way we do?

Let B(y) be the bond price as a function of yield to maturity. If I understood correctly, duration can (roughly) be understood as a measure of the change in $B in response to a change in y. What I don'...
l337n00b's user avatar
  • 109
0 votes
2 answers
105 views

Private Investment Impact on Bond Yields

From Japan to the US to Germany, we are currently seeing longer term bond yields falling at an alarming rate. I tune into a fair bit of economic commentary, and can often come to some sort of ...
Ryan Walter's user avatar
-1 votes
2 answers
55 views

Bondholder vs purchaser of bond

Kindly clarify if the term bondholder refers to the bond issuing authority or the person who purchases the bond. Context: if there's inflation in the economy, bondholder will lose and the person who ...
Harry's user avatar
  • 139
-1 votes
1 answer
2k views

What is the difference between quoted price and theoretical value of a bond?

When we refer to "quoted price" of bond, or "clean price", it is equivalent to refer to his "present value" or "theoretical value", which corresponds to the price that I invest in the bond? For ...
Mike9's user avatar
  • 1
-2 votes
2 answers
267 views

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-...
Pete Ferguson's user avatar
-3 votes
2 answers
91 views

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 ...
Stan Shunpike's user avatar