United States Treasury Securities

2019 ◽  
pp. 121-138
Author(s):  
Alan N. Rechtschaffen
Keyword(s):  
Interest Rates ◽  
Federal Government ◽  
Yield Curve ◽  
Fixed Income ◽  
Fixed Income Securities ◽  
United States Treasury ◽  
Treasury Bills ◽  
Treasury Securities ◽  
Treasury Department ◽  
The U.S

This chapter begins with a discussion of the purpose and goals of treasury securities. Treasury securities are a type of debt instrument providing limited credit risk. U.S. Treasury bills, notes, and bonds are issued by the Treasury Department and represent direct obligations of the U.S. government. Treasury securities are used to meet the needs of investors who wish to “loan” money to the federal government and in return receive a fixed or floating interest rate. The Treasury yield curve is a benchmark for fixed income securities across the spectrum of debt securities. The remainder of the chapter covers types of treasury securities, pricing, bond auctions and their effect on price, interest rates, and STRIPS (separate trading of registered interest and principal securities).

Why bond market couldn’t thrive in Pakistan

2017 ◽  
Vol 5 (1) ◽  
pp. 33
Author(s):  
Seema Rehman ◽  
Jameel Ahmed Khilji
Keyword(s):  
Interest Rates ◽  
Trading Volume ◽  
Yield Curve ◽  
Fixed Income ◽  
Fixed Income Securities ◽  
Secondary Markets ◽  
Sovereign Bonds ◽  
Initial Stage ◽  
Wide Range ◽  
To Come

Fixed income market has recently emerged in Pakistan. Onward 1990, prolusion of government securities paved a way for corporates to come forward with their debt papers and long term yield curve came in to existence by introducing FIB’s in 1992 followed by issuance of first Term Finance Certificates (TFC) in 1995. The TFCs’ coupon rate exhibits a wide range of different fixed and floating coupons related to numerous interest rates containing the discount rate, the Karachi Inter-bank Offer Rate (KIBOR) and Pakistan Investment Bond (PIB) rates. The SBP launched electronic trading platform for fixed income securities on 11th January, 2010 with the intention of improving the functioning and profundity of primary and secondary markets of sovereign bonds. The data available reveals that through this platform, the cumulative trading of sovereign securities touched 66% of the overall trading volume till the end of 2010 relative to 58.0% in January, 2010. In its initial stage, the E-bond platform provided the complete trading of sovereign bonds like T-bills, PIBs and Ijarah Sukuk. The other type of fixed income securities like repo, FRAs and swaps facilitated in subsequent phases.

scholarly journals Price and Size Discovery in Financial Markets: Evidence from the U.S. Treasury Securities Market

2018 ◽  
Vol 9 (2) ◽  
pp. 256-295 ◽  
Author(s):  
Michael J Fleming ◽  
Giang Nguyen
Keyword(s):  
Yield Curve ◽  
Securities Market ◽  
Order Flow ◽  
Treasury Securities ◽  
Oxford University ◽  
Informed Traders ◽  
Nature Of Information ◽  
Editorial Decision ◽  
To Come ◽  
The U.S

Abstract We study the workup protocol, an important size discovery mechanism in the U.S. Treasury market. We find that workup order flow shocks explain 6%–8% of the variation of returns on benchmark notes and, across maturities, 10% of the variation of the yield curve level factor. Information related to proprietary client order flow is more likely to show up in workup trades, whereas information derived from public announcements tends to come through preworkup trades. Our findings highlight how the nature of information affects the trade-off between speed and execution price when informed traders choose between the lit and workup channels. Received May 3, 2017; Editorial decision August 1, 2018 by Editor Thierry Foucault. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online. Internet Appendix tables are numbered with “IA” prefix.

Yield Curves, Swap Curves, and Term Structure of Interest Rates

2019 ◽  
pp. 203-228
Author(s):  
Tom P. Davis ◽  
Dmitri Mossessian
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Term Structure ◽  
Yield Curve ◽  
Yield Curves ◽  
No Arbitrage ◽  
Interest Rate Swap ◽  
The Interest Rate ◽  
Rate Swap ◽  
The U.S

This chapter discusses multiple definitions of the yield curve and provides a conceptual understanding on the construction of yield curves for several markets. It reviews several definitions of the yield curve and examines the basic principles of the arbitrage-free pricing as they apply to yield curve construction. The chapter also reviews cases in which the no-arbitrage assumption is dropped from the yield curve, and then moves to specifics of the arbitrage-free curve construction for bond and swap markets. The concepts of equilibrium and market curves are introduced. The details of construction of both types of the curve are illustrated with examples from the U.S. Treasury market and the U.S. interest rate swap market. The chapter concludes by examining the major changes to the swap curve construction process caused by the financial crisis of 2007–2008 that made a profound impact on the interest rate swap markets.

The Impact of the Employment Report and Forecasts Thereof on Fixed-Income Markets

2018 ◽  
Keyword(s):  
Interest Rates ◽  
Analyst Forecasts ◽  
Securities Market ◽  
Fixed Income ◽  
Market Uncertainty ◽  
Employment Level ◽  
Treasury Securities ◽  
Labor Statistics ◽  
Bureau Of Labor Statistics ◽  
The Impact

The authors examine the impact that the monthly Employment Situation Report issued by the Bureau of Labor Statistics (BLS) and the analyst forecasts of that report have on the U.S. Treasury securities market. Surprise increases in total non-farm payroll employment lead to increases in interest rates (especially one- to five-year rates), and surprise decreases lead to smaller declines in interest rates. This interest rate reaction is conditioned on the level of analyst uncertainty about the coming report. Interest rates also react to subsequent revisions of the payroll employment figures. Analyst forecasts as compiled by Bloomberg are unbiased forecasts of the BLS numbers and correctly anticipate most employment level changes. Moreover, there is evidence that the markets react to these forecasts prior to the BLS release. The authors also find that the release of the employment report lowers market uncertainty about future interest rates.

scholarly journals Anomalies: The Equity Premium Puzzle

1997 ◽  
Vol 11 (1) ◽  
pp. 191-200 ◽  
Author(s):  
Jeremy J Siegel ◽  
Richard H Thaler
Keyword(s):  
Risk Aversion ◽  
Equity Premium ◽  
Fixed Income ◽  
Fixed Income Securities ◽  
Treasury Bills ◽  
Long Time ◽  
Survivorship Bias ◽  
Time Periods ◽  
The Difference ◽  
Premium Puzzle

The equity premium is the difference in returns between equities and fixed income securities, such as Treasury bills. The puzzle refers to the fact that the premium has historically been very large--about 6 percent per year--too large to be easily explained by risk aversion. The authors document the evidence for the puzzle and find that is exists in many countries, over long time periods, and does not seem to be explained by survivorship bias. They also summarize several theoretical explanations. The authors conclude that it is difficult to explain the equity premium without incorporating some kind of irrationality.

scholarly journals Some Lessons from the Yield Curve

1995 ◽  
Vol 9 (3) ◽  
pp. 129-152 ◽  
Author(s):  
John Y Campbell
Keyword(s):  
Interest Rates ◽  
Term Structure ◽  
Yield Curve ◽  
Bond Market ◽  
Expectations Hypothesis ◽  
Expectation Hypothesis ◽  
Maturity Structure ◽  
Short And Long Term ◽  
The U.S

This paper reviews the literature on the relation between short- and long-term interest rates. It summarizes the mixed evidence on the expectation hypothesis of the term structure: when long rates are high relative to short rates, short rates tend to rise as implied by the expectations hypothesis, but long rates tend to fall, which is contrary to the expectations hypothesis. The paper discusses the response of the U.S. bond market to shifts in monetary policy in the spring of 1994 and reviews the debate over the optimal maturity structure of the U.S. government debt.

scholarly journals The Normalization of the European Central Bank’s Monetary Policy from an Austrian Perspective

2018 ◽  
pp. 359-371
Author(s):  
Leef H. Dierks
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Euro Area ◽  
Quantitative Easing ◽  
Fixed Income ◽  
Fixed Income Securities ◽  
Market Prices ◽  
European Central ◽  
The Us ◽  
Low Interest Rates

After several years of historically low interest rates and quantitative easing, the European Central Bank (ECB) has finally started wind-ing down its ultra-accommodative monetary policy in late 2018. Among the first steps tapering its asset purchase programme (APP), which foresees monthly purchases of up to €30bn per month until September 2018 — «or beyond, if necessary, and in any case until the Governing Council sees a sustained adjustment in the path of infla-tion consistent with its inflation aim» (ECB, 2018a). By then, pur-chases of euro area fixed income securities on behalf of the ECB will have mounted to as much as €2,550bn or almost 90% of euro area GDP (€2,834bn in market prices in Q4 2017, the latest date for which data were available (ECB, 2018b)). Further, according to market esti-mates, the first hike of the main refinancing rate, which was slashed to 0% in March 2016, could emerge in Q1 2019, thereby following a tightening of the monetary policy the US Federal Reserve (FED) had already started in December 2015 (FED, 2015).

DOES CURVATURE ENHANCE FORECASTING?

2009 ◽  
Vol 12 (08) ◽  
pp. 1171-1196 ◽  
Author(s):  
CAIO ALMEIDA ◽  
ROMEU GOMES ◽  
ANDRÉ LEITE ◽  
AXEL SIMONSEN ◽  
JOSÉ VICENTE
Keyword(s):  
Interest Rates ◽  
Root Mean Square ◽  
Term Structure ◽  
Yield Curve ◽  
Mean Square ◽  
Fixed Income ◽  
Curvature Term ◽  
Income Data ◽  
Mean Square Errors ◽  
Three Factor

In this paper, we analyze the importance of curvature term structure movements on forecasts of interest rates. An extension of the exponential three-factor Diebold and Li (2006) model is proposed, where a fourth factor captures a second type of curvature. The new factor increases model ability to generate volatility and to capture nonlinearities in the yield curve, leading to a significant improvement of forecasting ability. The model is tested against the original Diebold and Li model and some other benchmarks. Based on a forecasting experiment with Brazilian fixed income data, it obtains significantly lower bias and root mean square errors for most examined maturities, and under three different forecasting horizons. Robustness tests based on two sub-sample analyses partially confirm the favorable results.

scholarly journals A VAR Analysis Of US-China Economic Linkages

2011 ◽  
Vol 8 (7) ◽  
Author(s):  
Dene T. Hurley
Keyword(s):  
Interest Rates ◽  
Impulse Response ◽  
Significant Role ◽  
Variance Decomposition ◽  
Short Term ◽  
Treasury Bill ◽  
Treasury Securities ◽  
Var Analysis ◽  
The U.S

An increase in Chinese purchases of U.S. treasury securities in parallel with Chinas commitment to maintain the value of the Yuan have been blamed in recent years for the divergence of the U.S. long-term and short-term interest rates. Results of the VECM, variance decomposition and impulse response analyses provided support for the growing speculations that growing Chinese demand for U.S. securities played a significant role in keeping the 10-year Treasury bill rate low while keeping the Yuan weak relative to the U.S. dollar. As for the U.S. long-term and short-term interest rates, the causality was found to run from the 10-year Treasury bill yield to the s rate which helps to explain why rising short-term rate in the U.S. since mid-2004 had little or no impact on the long-term rate.

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