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I thought I got my Bond income right, but my brokerage company's calculator got me totally confused. So here is the problem: I bought a note (US treasury) yesterday: cusip: 912828TN0 (secondary market) Coupon rate: 1% Maturity date: 8/31/19; Settlement date - 5/1/19; YTM at a purchase point: 2.409%; I paid accrued interest: $1.68; my principle: $995.20; Can you tell me, please, how much money should I get back on 8/31/19? :) Thank you so much in advance!

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  • These are sold with a $1000 face value per note. Doesn’t the statement tell you the value at maturity?
    – JTP - Apologise to Monica ♦
    Commented May 1, 2019 at 23:46
  • I know the value at maturity. That's not what I am asking about. I'd like to know how much money, in total, I am supposed to get back, including the interest
    – GemStone
    Commented May 1, 2019 at 23:51

1 Answer 1

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Assuming you bought one $1,000 note, you will get $1,005 at maturity. The $1,000 principal plus the 0.5% (semi-annual 1%) coupon.

You paid for roughly 2 months of accrued interest ($5 * 2/6 = 1.67) when you bought the note, and get the full 6 months when it settles, so your net interest will be $3.32.

Your net yield is therefore (1005/996.88 ^ 12/4) - 1 = 2.46% The difference between that and your quote is probably due to a more accurate daycount than just the number of months to maturity.

I bought a note with the Yield to Maturity of 2.409%. Shouldn't I be getting 6 month of this annual rate? and NOT the coupon rate?

No - yield to maturity is your return relative to what you paid for the note, and annualized (in your case, the return is 0.8% or about $8 over 4 months). The interest paid is fixed at 1% of the note amount (or 0.5% twice a year).

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  • I killed my answer. T-bills are semi-annual as you wrote. I’m guessing that’s what OP has.
    – JTP - Apologise to Monica ♦
    Commented May 2, 2019 at 0:11
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    You had me doubting myself for a minute :)
    – D Stanley
    Commented May 2, 2019 at 0:12
  • Thank you so much for your answer. Here what I am confused about: I bought a note with the Yield to Maturity of 2.409%. Shouldn't I be getting 6 month of this annual rate? and NOT the coupon rate?
    – GemStone
    Commented May 2, 2019 at 0:24
  • @GemStone See my edit.
    – D Stanley
    Commented May 2, 2019 at 0:32
  • Yes, that makes sense. 0.8% is my return for 4 months - it is 2.4% annually! :) At the end it aligns.
    – GemStone
    Commented May 2, 2019 at 13:59

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