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re: 2yr Treasury Nearly 4 Percent
Posted on 9/21/22 at 5:20 pm to wutangfinancial
Posted on 9/21/22 at 5:20 pm to wutangfinancial
quote:
Some of these on-the-run treasury bonds 20+ duration are going to yield 30-40% on top of the coupon the next few years. Most people don't understand that.
please explain, Great Wutang - treasury bonds don't pay coupons? and how would they yield 30%+ if the rate is locked in at issue? maybe i am misunderstanding something here
1
Posted on 9/21/22 at 7:35 pm to kung fu kenny
quote:
please explain, Great Wutang - treasury bonds don't pay coupons? and how would they yield 30%+ if the rate is locked in at issue? maybe i am misunderstanding something here
Treasury bonds pay out a coupon. Bonds with higher duration will increase in price more than shorter duration bonds because they have higher convexity, so as rates go down, you have gains on top of the coupon. You are assuming rates are going down from what is priced in now in this scenario.
This post was edited on 9/21/22 at 7:37 pm
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