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Mon 7 Oct, 2019 05:21 am
Since primary bonds are only auctioned a certain number of times per year, how are the bond rates updated by the second? The bond rates listed on Treasury.gov are updated daily. Aren't these primary bond rates? Where are these prices from if the underlying bond is only auctioned once per month, for example?
@ThomasTheApe,
The bonds are traded like stocks and the prices go up and down with the supply and demand. If a bond has a face value of $100 and a coupon of 5%, but the price drops to $95, the interest rate is now 5% * 100/95 = 5.26%.
@engineer,
Ok. I see what I did wrong. I read the rates on this site...
https://www.treasury.gov/resource-center/data-chart-center/interest-rates/pages/textview.aspx?data=yield
I assumed this was primary market because the site is Treasury.gov. But now I see in the fine print that they get this data from the OTC market.
@engineer,
Then why have the yields on 10year treasuries still been going down despite 2 recent rate cuts?
@ThomasTheApe,
Because the US economy is doing pretty well compared to the rest of the world resulting in the dollar getting stronger and more demand for US Treasuries. Higher demand -> higher price -> lower yield. The rate cuts are in the short term borrowing rate that banks charge each other and don't impact treasury rates.
Does anyone know where I can find the results of recent treasury auctions? I can't seem to find it on Treasury.gov.
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