Why would a bonds discount margin widen but its price increase? Shouldn't the price be falling when margins are widening?
Looking at the bond pricing formula, if the price is higher doesn't the rate of return have to be lower? What am I missing?
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$\begingroup$ Did forward rates change, i.e. the shape of the yield curve? Discount margin uses the current floating rate and flat yield (future coupons set at current value of the reference rate). Forward yield is a better measure of expected return. $\endgroup$ – Bond wiz Jul 16 '20 at 13:59
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Is it trading below par ? If yes it can converge to par while keeping the same DM.
