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Yes treasuries are liquid, but a 100 bps rise in yield in a 10y bond means the face value is 10% less. Duration risk is (bps yield increase * years) where 100 b
by quickthrowman 4y ago
Yes treasuries are liquid, but a 100 bps rise in yield in a 10y bond means the face value is 10% less. Duration risk is (bps yield increase * years) where 100 bps is 1%.
Duration risk matters a lot less with the shorter dates issues.
- deanmoriarty 4y agoIf interest rates went up 10% (hypothetical, I understand it won’t happen), what would the face value of an existing 10y bond be?
- shukantpal 4y agoApproximately drop by 50% if existing rates are near zero. That's because a 10% yield will double your money when a 10y bond matures. So existing bonds have to halve to double your money in the same way.
- deanmoriarty 4y agoSo the above poster's "Duration risk is (bps yield increase * years)" is not accurate?