Questions tagged [bond-yields]

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4answers
198 views

Does IRR (and therefore YTM) assume that all cashflows are reinvested at the IRR (or YTM)? If so, how does IRR the formula show this?

There are many articles I have read recently that say the reinvestment of interim cashflow idea in the IRR is a fallacy though I am not sure who to believe since so many resources, for example ...
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15 views

Standardize YTM's of coupon bonds with different coupon frequencies

In Financial Mathematics for Actuaries by Wai-Sum Chan and Yiu-Kuen Tse, the following formula is given for a $n$-year annual coupon bond with transaction price $P$ where the yield to maturity is $i_Y$...
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28 views

adjusting treasury futures exposure using micros

I want to decrease my exposure to a 10-year note futures by using 10-year micro futures after volatility-adjusting them. I've calculated that the difference in volatility in the micro has 5.125x the ...
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2answers
96 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, ...
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3answers
126 views

Estimate yield of coupon bond given yield of zero coupon bond

Suppose that now is August 2006 and we have the following zero-coupon bonds: Maturity: August 2007, Price: 95,53 ...
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0answers
47 views

Yield to maturity of amortized bond

I have an amortized bond with maturity at 30.04.2023, a semiannual frequency, 10% coupon rate, 30Е/360 day convention, and a clean price of 104.9367. Also, there are two amortization payments: 300 at ...
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1answer
71 views

Yield to call on American style callable bond

(Assuming current bond price is quoted and maturity, par value, strike price all known..) I was wondering how do we calculate yield to call on American style callable bonds after the call date has ...
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1answer
63 views

Short Eurodollar futures front v back month

What is the difference between shorting the front month, rolling it into a back month vs just shorting the back month? For example: shorting the front month and rolling the short every 3 months until ...
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1answer
141 views

Why are bonds usually issued at par?

Bonds are not always issued at par, but they often are. From a standard finance theory perspective, this cannot be justified. For investors, the division between coupon and principal returns is ...
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0answers
135 views

What explains bond “convenience yields”?

Bond convenience yield refers to nonpecuniary benefits of holding bonds, that is, some benefit other than direct cash flows. Recently there has been much empirical academic research on such yields. ...
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48 views

Treasury Benchmark and Bond Pricing

I'm trying to figure out the connection between the following quantities but no luck so far. ...
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1answer
83 views

Can you use the Svensson model to fit a smoothed curve for yields on coupon paying bonds rather than spot rates?

i've been struggling to find an answer to this question online, I know most applications of the model are used on zero (aka spot) rates. But could you use yields from a sovereign yield curve (i.e ...
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2answers
102 views

decomposition of yields into global and local components

It is reasonable to assume that global yields move in tandem to a certain extent, driven by a global and a local component. Are there any ways to separate the two, beyond the obvious (regress the ...
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48 views

Nominal bond yields vs. TIPS yields?

I am struggling with understanding the difference in yields between nominal bonds and inflation-adjusted bonds. With inflation adjusted bond like TIPS, every coupon payment in addition to the face ...
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0answers
37 views

How to compute the yield to maturity on a zero-coupon 3 year bond in this case?

Suppose I have the following problem: We have data on three bonds: a one-year zero-coupon bond (bond A), a twoyear zero-coupon bond (bond B), and a three-year bond with an annual coupon equal to 5% ...
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33 views

Euribor + margin

I have this bond assigment where I have to calculate the CF each quarter, given a constant EURIBOR3M rate of -0,539%. There is also a 1,6% margin per annum that I have to take into account. The ...
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0answers
88 views

How accurate is YTM as a reference measure of non-holding-to-maturity return?

We need to offer an estimated return of a non-hold-to-maturity strategy. Essentially, we borrow money from the market and buy a bond. Instead of holding the bond to mauturity and locking in a return ...
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88 views

Understanding the BAML MOVE index

Hello quant community. I am looking for more information about a very interesting index: BAML-ICE MOVE index. There is very little literature online that details how the index levels are calculated ...
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1answer
49 views

Why can a two-factor interest rate model not be used to value a coupon bearing bond as the sum of options on ZCBs

I am currently reading some notes which state that For one-factor models, the value of a European option on a coupon bond can be calculated as the sum of European options on zero-coupon bonds (ZCBs). ...
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1k views

Yield-to-maturity (YTM) vs effective annual rate (EAR)

If the yield-to-maturity (YTM) on a bond is 5%, is the effective annual rate (EAR) on the cash flows associated with the bond also 5%? I know that YTM does account for the present value of a bond's ...
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1answer
93 views

Are government bond yields usually expressed as yield to maturity (YTM) or annual yield?

If US 10yr = 2%, does it mean if I hold the bond until maturity/for next 10 years the yield is 2% or I get an annual return of 2% for 10 years? For example the yields in the link: https://www....
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2answers
98 views

Hull's book par yield example [closed]

In Hull's book (9th edition), on page 83, there is a simple example of par yield: I am a bit confused when it says "this has semiannual compounding because payments are assumed to be made every ...
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2answers
233 views

Is there any source that describes Wall Street quotation conventions for fixed income securities (e.g. corporate bonds)?

For instance, high yield corporate bonds tend to be quoted by price and investment grade tends to be quoted by yield. Is there any source that describes such quoting conventions, or corporate bonds ...
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1answer
158 views

Calculate zero recovery discount curve from bond yields and cds prices?

Clarifying the below: Given the prices of bonds that are not trading in distress as yet (so yields are meaningful), and data on the CDS spreads, I’ve been looking for some approaches for estimating a ...
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2answers
282 views

Bond price distribution if yield assumed log-normal

Suppose we assume that yields on a zero-coupon bond that matures at time $T$ follow a log-normal process of the type $y(t,T)=y(t_0,T)e^{-0.5\sigma^2t+\sigma W_t}$ under the T-forward measure. Then, I ...
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1answer
224 views

QuantLib Bond Yield

I think I have the same question as was asked here but I still haven't been able to resolve my issue: Excel YIELD function equivalent in python Quantlib I am trying to calculate the yield on a bond ...
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1answer
2k views

What does the conversion factor for Treasury bond futures do in relation to the 6% coupon specification for the contract?

I understand that the specification for say, a 10-year Treasury note futures contract is for a face value of $100,000 with a 6% coupon. However, the eligible securities that may be delivered span ...
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1answer
63 views

Relationship Between Yield Curve and STRIP Prices

Suppose at different maturities (e.g., 1 year from now, 2 years from now, 3 years from now, etc.), the price of a STRIP security is consistently decreasing as the maturity increases all else held ...
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3answers
369 views

Bond prices and probability of default

We learn in Finance 101 that the price of a bond is the present value of future cash flows. There is no mention of default risk. Still, bond prices move each day, without a change in the payment ...
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1answer
191 views

Misleading Yield (Callable Bonds with call price 100)

When looking at Callable Bonds, I've noticed that we often have a call price of 100 with a call date a few month before expiry. For example: US09681MAS70: coupon <...
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1answer
126 views

Why Yield cannot be calculated for short dated Bonds using Quantlib

I am trying to calculate a yield from a clean price using Quantlib for Bond. I play a lot with the Quantlib samples (Bonds.java) and succeed but when I change to set today close to maturity, Quantlib ...
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2answers
129 views

Meaning/importance of "yields" (bonds) [closed]

After reading many articles on bond yields (yield-to-maturity) I'm still not getting what they are used for by investors. I understand the math behind its evaluation, but, say, what exactly I can tell ...
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1answer
109 views

Novice question about bond pricing [closed]

I'm reading a material on DV01 calculation which use a example as follows: current 10-year Treasury note that is cheapest-to-deliver into the March 2009 10-Year Treasury Note futures contract: the 5-1/...
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1answer
96 views

Converting US Treasury CMT to Discount Yields

I'd like to convert the US Treasury Constant Maturity series (par, semi-annual coupon, Actual/365 daycount convention) into Discount Factors (for appropriate comparison for certain money-market series,...
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1answer
315 views

Yield of a Bond

If we have a coupon bearing Bond and want to calculate it's Yield then what is the standard practice to determine the ...
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1answer
1k views

How to compute par yield from zero rate curve?

How does one calculate the below two-year par yield given the zero rate curve: Assume the following two-year zero rate curve, with continuous compounding: ...
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2answers
126 views

FED rate cuts don't exist

I would just like to confirm my understanding of how the FED controls interest rates. In my view there's no such thing as changing an interest rate. Because rate/yield is just an effect of price ...
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1answer
50 views

Agency Fixed Rate RMBS Yield Decomposition

I'm trying to find the best way to decompose the yield on an index of fixed residential MBS securities and want to open up the question to the community. The goal is to look at this from a ...
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1answer
101 views

Which curve is better to approximate bond yields (python)

I would like to approximate bond yields in python. But the question arose which curve describes this better? ...
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1answer
47 views

Spread determinants

Knowing that bond A is more liquid that bond B, i.e higher volumes are traded on bond A, does this information have any impact on the spread? Can we say that the large volumes traded on A will ...
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2answers
80 views

Value of a 30 year bond using the Yield curve

If I buy a $1 30 year bond with 4% coupon payment, would my cash flow be: $$ V^{30}(t) = \frac{$1 \times0.04}{1 + R(t, 1)} + \frac{$1 \times0.04}{1 + R(t, 2)} + \cdots + \frac{$1 + $1 \times0.04}{1 + ...
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2answers
902 views

What does the word "affine" mean in affine term structure models?

I am new to the field of Mathematical Finance and wanted to get an idea on the intuitive, physical and mathematical meaning of the term "affine" in Affine term structure models. Any literature ...
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1answer
47 views

What estimation method is best to conduct event study on unconventional monetary policy

I have collected bond yield data from 01/01/2008:31/12/2019 for several euro-zone countries. I would like to conduct an event study analysis of the main Non standard measures announced by central ...
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1answer
43 views

Stale prices: Greek government bond yields

I am analysing the effects of some Central Bank's policies on asset prices. Among others, daily 5y and 10y Greek government bond yields are part of my dataset. Data are fromm Datastream. I know that ...
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2answers
156 views

Bond interest rate, the relationship between a bond's interest rate and its present value, and discount rate [closed]

Consider this equation for calculating the Present Value of Bond that pays a coupon and its face value at maturity: C is the coupon, r is the interest rate on the bond, m is the number of times it ...
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1answer
474 views

Why is the treasury yield on Yahoo finance different from that on U.S. Department of Treasury?

The 13 Week Treasury Yield on Yahoo Finance is ...
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1answer
155 views

Difference between par value and principal?

Could someone explain what is the difference between principal and par value in terms of a bond? Thanks!
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1answer
140 views

HJM framework and expectations hypothesis, updated

Is there a way one can decompose the yield of say a government bond with respect the the HJM framework? (into say an expectations component and a term premium component). As far as I can see the HJM ...
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0answers
92 views

Optimized search for yield-to-worst of a callable bond

Suppose that I need to find the yield-to-worst of a callable bond, and that the option is American (call any time). The bond may have step-up coupons and/or non-constant call price (oprion strike). ...
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1answer
2k views

Calculating YTM for a floating rate bond

I am trying to understand how YTM's are calculated for floating rate notes. I have had a go at calculating it and I am always a few bps off for every FRN I try to calculate. Does anyone have any ideas ...