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36 votes

How Is There A Yield Curve For Treasuries?

The basic detail you're missing is that you can't redeem the bond for it's face/par value until maturity. If you buy the 30 year bond at 2.5% now, and in one year's time the rate for a new 29 year ...
GS - Apologise to Monica's user avatar
32 votes
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How Is There A Yield Curve For Treasuries?

There are some good answers already but I think it would help to walk through a concrete scenario under your implied hypothesis. "Why buy a 1-year Treasury Bill at 1.25%, when I can buy a 30-year ...
Grade 'Eh' Bacon's user avatar
25 votes
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Why invest in long term government bonds when the yield curve is inverting?

Short-term bonds might pay more interest, but only for a short time. When they mature, overall interest rates available for reinvestment are likely to be lower in this scenario. (Long-term rates are ...
nanoman's user avatar
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17 votes

Why invest in long term government bonds when the yield curve is inverting?

Bonds are interesting and you've come across most of what makes them so interesting. The interesting thing with bonds, is all the already outstanding notes of similar remaining duration and ...
quid's user avatar
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7 votes

How Is There A Yield Curve For Treasuries?

You cannot count on a crisis (specifically a deflationary crisis) happening just when you want to liquidate. If you need to sell a long-term bond (before maturity) during unexpectedly strong economic ...
nanoman's user avatar
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5 votes

How to reconcile bond duration with yield responses in Long-Term vs Short-Term bonds?

Your question refers to "interest rates" without specifying which interest rates you are talking about. Short and long term bonds are priced relative to short and long term interest rates ...
Brian Borchers's user avatar
3 votes

Confusion about bonds, and the relationship between floating rates, prices, credit risk, and collateral

The choice of discount curve is not an exact science. It should incorporate the risk of default of the issuer and the future expectation of interest rates. It's certainly not specified in the contract....
D Stanley's user avatar
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3 votes
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Which yield curve is inverting?

1) How does the yield change? As D Stanley put it, this is the difference between yield and interest rate. The bond might still be for $1000 at 2% interest rate (a $20 coupon), but it's being sold ...
Earth's user avatar
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2 votes

US treasuries yield on economy news

The yield of a bond is a function of the coupons it pays (both how much and how many) and the market price. Since these bonds trade in the secondary market continuously, yields can be computed in real-...
D Stanley's user avatar
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2 votes
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US treasuries yield on economy news

U.S. Treasury pricing is done via auction at time of issuance and traded like any other financial instrument (i.e. stocks/bonds) where the price/value is agreed upon by the seller and buyer. U.S. ...
Morrison Chang's user avatar
2 votes
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What are the dates that the yield curve inverted?

Per this article on March 25th, theyield curve inverted on March 22nd : The yield on the U.S. 10-year Treasury note on Friday dipped below the yield on the 3-month paper. It was the first time ...
Bob Baerker's user avatar
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2 votes

Why invest in long term government bonds when the yield curve is inverting?

Say that you want to lend money for a ten-year period. The yield curve bakes in expected future short rates, so it's always shaped so that you're indifferent between rolling over one-year bonds for ...
tkunk's user avatar
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2 votes

Locking in rates during yield curve inversion

If I buy a 1 year bond for $10,000 paying (optimistically) 5%. Then after one year the interest rates drop to 1% and stay that way for 9 more years, I earn 5% for 1 year and 1% for 9 more years. And ...
Vality's user avatar
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2 votes

Which yield curve is inverting?

For question 4, the most official source of the US yield curves is here: https://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield Daily yield ...
DavePhD's user avatar
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2 votes
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What does it mean that UST10 have risen from 1.2 to greater than 1.7 over the last half year?

Does it mean that the bond market foresees high inflation in the next decade or what? Not necessarily inflation, but the market thinks that interest rates (meaning the interest rates that the Federal ...
D Stanley's user avatar
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2 votes
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Trying to understand the U.S. yield curve and global inflation

Yields at the long end need to be higher than at the shorter end to compensate investors for the risk of fixing their investment for a long time. Long term bonds expose the invester to both inflation ...
Manziel's user avatar
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2 votes

How Is There A Yield Curve For Treasuries?

Two other issues come to mind: If the liquidity of the market and the issuer were all that mattered, different bonds/bills would just be like different denominations of currency. But different ...
Orange Coast- reinstate Monica's user avatar
2 votes

Does yield curve inversion refer to the shape of the curve, or just its sign?

You seem to be concerned with the mathematics of the curve. But it's really important to remember that economics (and finance) is not a science like chemistry. Baking soda mixed with vinegar is not ...
quid's user avatar
  • 49k
2 votes

How is the yield of this particular bond calculated?

Simplified, you can expect (no default, no call as this bond is callable etc) that the bond pays back 100 at the end but is only worth 62 now. Therefore, over the next 5 years until maturity, you gain ...
AKdemy's user avatar
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2 votes
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How is the yield of this particular bond calculated?

Yield is always calculated as the discount rate that makes the present value of the coupons and final redemption equal to the market price. (If you aren't familiar with the concepts of discounting ...
D Stanley's user avatar
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2 votes

How to reconcile bond duration with yield responses in Long-Term vs Short-Term bonds?

The key is to distinguish price and yield. Duration measures the sensitivity of a bonds price to interest rate changes. Yield is in some sense synonymous with interest rates - meaning it's the ...
D Stanley's user avatar
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2 votes
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Clarification on the 6-Month Yield Point on the US Treasury Yield Curve

According to the US Treasury: This par yield curve, which relates the par yield on a security to its time to maturity, is based on the closing market bid prices on the most recently auctioned ...
D Stanley's user avatar
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1 vote

What drives a yield curve shape?

It's generally accepted that there are three factors at play and together they shape the yield curve. At times the change in some factors may be more prominent than others, but they always coexist. ...
xiaomy's user avatar
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1 vote
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Unusually inverted yield curve for time deposits

This is in United States, right? You are correct, that's an inverted yield curve. However, the inversion is so strong it may be an error. Or it may be possible that the particular bank has a huge ...
juhist's user avatar
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1 vote
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Lag between Fed Announcement and Actual Implementation

Fed announces its new target range for Fed Funds... ...I'm wondering, because the Fed announced the new range of 3.00-3.25% on September 21, but as of end-of-day, September 22, the Treasury shows a 1M ...
mhoran_psprep's user avatar
1 vote
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What is the spread between maturities called?

It is accurate to call a comparison between different maturities a spread. Formally you would refer to the spreads between similar issues in different maturities as the curve spread, so the "two-...
Thomas Boyd's user avatar
1 vote

Does yield curve inversion refer to the shape of the curve, or just its sign?

The yield curve is a graph of interest rates across time (2 month, 1 year, 2 year, 5 year, etc.) for similar debt instruments. The most closely watched yield curve is for US Treasury securities. ...
Bob Baerker's user avatar
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1 vote
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Locking in rates during yield curve inversion

the coupons from the longer term bonds will still have to be reinvested at current market rates The interest earned from reinvestment of the original bond's interest is a second-order effect. It is ...
nanoman's user avatar
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1 vote

Why does a steepening bond yield curve usually result in a price increase for stocks in the financial sector?

Banks' business is maturity transformation. Their assets (loans) are long-dated and their liabilities (deposits) are short-dated. A steep yield curve leads to high profits, e.g. receive 7% loan ...
Orange Coast- reinstate Monica's user avatar
1 vote

Which yield curve is inverting?

so how can the yield of 30 year bond become lower if the US does not decide to emit a bond with a lower yield? You're confusing yield with interest rate. If you buy a $100 1-year bond that pays 2% ...
D Stanley's user avatar
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