February 18, 2003

Bond Yields

The bond yield is the interest rate that makes the present value of the principle and coupons equal to the observed price.

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We took a look at the WSJ Treasury securities table. Bond dealers have bid and asked prices just like used car dealers. The bid-asked spread is small for Treasuries, but the transactions are in the millions.

When the WSJ talks about "interest rates" they are often talking about the Treasury bond yields.

Posted by bparke at February 18, 2003 04:09 PM