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What is the historical reason for treasury bonds to be priced in 32nds?

I have tried using Google and this site to find the answer, but have not been able to find anything definite.

Three possibilities I found during my search that had no documentation what so ever backing them up:

  1. Probably a carry-over from European influence in monetary system. Spain had "pieces of 8" coins... bonds might have been tic-priced on that concept... "1/8" of something being the smallest denomination. For bonds 1/8 was too large of a tic? So, 1/32 = 1/4 of 1/8. source

  2. I believe it’s because the old ticker machines only had 32 symbols making each symbol (1/32) a tick. source

  3. I suppose it remains from the LSD days when an eighth of a pound was 2s6d

Just something I always wondered about, but never actually got anyone to answer. So I hope someone on here knows why!

  • Which country's treasury bonds are you referring to? Got links for your quoted sources? – Chris W. Rea Apr 24 '14 at 14:30
  • added sources and country in question. also, i cant add the third source link, because lack of points. It came from here: answers.yahoo.com/question/index?qid=20100412125628AADHTyS – sufkop Apr 24 '14 at 15:38
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    "pieces of eight! pieces of eight!" where each piece (bit) of a dollar was 12.5 cents. Two bits made a quarter. Two shillings and six pence was usually referred to as a half-crown in the old British currency. – Dilip Sarwate Apr 24 '14 at 16:24
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It used to be that stocks were traded in fractions too. It was only recently that they all were converted over into decimals.

I think you're basically right about being a holdover from Europe, especially Spain:

These early stockbrokers [who were trying to create the NYSE] looked to Europe for a model to build their system on and decided to base it on the system of Spain. This was largely due to the fact that the U.S. dollar's value had been based on the value of the Spanish real.

The real was the Spanish silver dollar and was divided into eight parts. This evolved from the method of counting on the hands, similar to the decimal system. The difference was that the decimal system used the thumbs as part of the number while this other system used the thumbs to denote the total of the four fingers. Therefore, a person would count to four on one hand and then use the thumb to indicate a total while they counted on the other hand. Two thumbs equaled eight. The real could be broken into two, four or eight parts, giving birth to the term pieces of eight.

  • great, thanks mlathe! Do you know of any sources to back this story up historically? – sufkop Apr 25 '14 at 8:17
  • Except for the "how stuff works" link I gave from above, no not really. I looked a bit more, and found a few more "sources", but i wouldn't call them authoritative: investopedia, Wikipedia (last paragraph of US section) – mlathe Apr 25 '14 at 18:19
  • great, thanks for the clarification. because this is the only answer so far, i have chosen it as the accepted answer. – sufkop Apr 28 '14 at 8:03

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