Who determines treasury bill/note/bond yields? | TigerDroppings.com

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Cmlsu5618
McNeese State Fan
Destin, FL
Member since Sep 2010
2558 posts
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Who determines treasury bill/note/bond yields?



The U.S. treasury?

I know these rates are based of market determinants, but who has the ultimate hand in deciding where to set daily rates?


ETA:
Also, if the Treasury is the entity that sets daily fixed income rates, who is in charge of the other rates?

Fed Funds- FOMC?
Prime Rate- ?
Discount Rate- ?

I'm trying to get a better understanding of rates in general.



This post was edited on 10/2 at 1:10 pm



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CHSBears
Texas A&M Fan
Baton Rouge
Member since Aug 2007
520 posts

re: Who determines treasury bill/note/bond yields?


Not enough space to give details about auctions. But you can begin reading here.

LINK






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BennyAndTheInkJets
Arkansas Fan
NYC / Orange County
Member since Nov 2010
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re: Who determines treasury bill/note/bond yields?


Markets will determine Treasury yields. Treasury coupon rates are just the interest rate that the government will have to pay on its debt. The coupon rate is determined during the auction process where a coupon will be set by competitive and non-competitive bids from direct bidders (usually money managers/asset managers) indirect bidders, (usually foreign central banks), and primary dealers (your large investment banks that are supposed to act as market makers).

From the rest of your question the Fed Funds target rate is set by the Fed. The Prime Rate is just the Fed Funds target +3%, and the Fed sets the discount rate. There are some market technicals for determining rates based off of these, for example the 10-year Treasury rate has never been higher than 4% above the Fed Funds target rate, it's bumped it a couple times but never breached.

So to answer your question in the most simplified way, the Fed sets most short-term rates and the markets determine all other rates.






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Cmlsu5618
McNeese State Fan
Destin, FL
Member since Sep 2010
2558 posts
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re: Who determines treasury bill/note/bond yields?


Thanks to the both of you





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