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Can you clarify what you mean by a loss here? > Investors bought US bonds at a loss US Treasuries did not have negative yields last year which is the the clos
by whatok 9y ago
Can you clarify what you mean by a loss here?
> Investors bought US bonds at a loss
US Treasuries did not have negative yields last year which is the the closest thing I would consider a loss but would depend on the context.
- bkanber 9y agoI looked at the prices again, you're right that yields on the primary were positive. Yield on the secondary however was -1.7% in April 2016, for instance. I'll update my post above to specify losses were for the secondary market. Edit: can't edit the OP anymore, so hopefully this comment serves.
- whatok 9y agoCan you link what you're looking at? It sounds like you're conflating yields with returns.
- bkanber 9y agoI don't think I am, but I could be wrong (as always). Specifically I'm talking about yield to maturity which is one kind of return calculation (just like mean is one type of average calculation). Total return can only be calculated after the fact once capital gains are factored in. Since this is a forward-looking calculation we can't do that. I'm using the term "yield", more specifically "yield to maturity" because I'm assuming bonds were held until maturity. In that situation yield to maturity should be the same as total return; ie, total return is equal to yield to maturity in the special case that there are no capital gains or losses and the bond is held to maturity. So in this case I'm not conflating them, they are the same thing. Yield to maturity is based on par value, coupon rate, term, and purchase price. The yield to maturity formula is: YTM = (C + ((F-P) / n)) / ((F+P) / 2) Where C = coupon, F = Face/par, P = price, n = years to maturity. Looking up historical data for Apr 2016 you get P = $137 (secondary) and C = 1.7%. Plug it all in and you get a yield to maturity / rate of return of -1.7%.
- whatok 9y agoCan you link what you're looking at or provide the bond CUSIP?