How to understand US treasuries and yields?

Tiger_Academy
2023-10-24

10-year Treasury yield hit a 16-year high and suppressed the stock market. However, the relationship bewteen US treasury and yields has been confusing the investors.

chart from bloomberg

For example,

US medium-term bonds maturing on August 31, 2024, with an coupon rate of 3.25%" has an annualized yield of 5.25%.

What’s the relationship between treasuries and treasury yields? Why US treasuries have two different rates?

  • Treasury prices and US Treasury yields are negatively correlated.

  • The fixed face value of the US Treasury bond is $100.

  • The true yield of US Treasury bonds = coupon rate income + trading spread

  • Coupon rate income: Coupon rate is fixed and determined at the time of bond issuance.

  • Trading spread: The trading price of bonds usually fluctuates in the market.

Therefore, the two different rates are fixed coupon rate and the true yield of US treasuries.

Time to buy treasury as Ackman close short position?
Bill Ackman, who short on long-term US bonds, tweeted on October 23 that he had closed his position, and said the high yield of long-term US Treasury bonds was unsustainable. ------------ Is it time to buy the US treasury? Are you bullish or bearish on treasuries?
Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

Comments

We need your insight to fill this gap
Leave a comment
6