Friday, August 30, 2024 |
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MANAGING DIRECTOR: |
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US Treasury Market |
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| Date | 1 mo | 3 mo | 6 mo | 1 yr | 2 yr | 3 yr | 5 yr | 7 yr | 10 yr | 20 yr | 30 yr |
| 08/23/24 | 5.30 | 5.13 | 4.89 | 4.38 | 3.92 | 3.73 | 3.65 | 3.70 | 3.80 | 4.18 | 4.09 |
| 08/26/24 | 5.33 | 5.13 | 4.91 | 4.41 | 3.94 | 3.75 | 3.67 | 3.72 | 3.82 | 4.19 | 4.11 |
| 08/27/24 | 5.33 | 5.11 | 4.84 | 4.39 | 3.90 | 3.72 | 3.65 | 3.72 | 3.82 | 4.20 | 4.11 |
| 08/28/24 | 5.31 | 5.11 | 4.84 | 4.40 | 3.87 | 3.73 | 3.67 | 3.73 | 3.84 | 4.22 | 4.13 |
| 08/29/24 | 5.29 | 5.13 | 4.86 | 4.42 | 3.90 | 3.75 | 3.67 | 3.76 | 3.86 | 4.24 | 4.15 |
The data in the table above is static as of the time it was pulled, so rates may have changed. Treat all data in this table and PMR as indications only and availability is always subject to change. This information was pulled manually from sources we believe to be reliable. New source, as of 12/12/2022, Bloomberg, L.L.P. As of: close of business 08/29/2024.
Accretion vs Amortization
For those of you who may be newer to the industry, we thought we would take this opportunity to review a few bond accounting terms that are sometimes hard to understand, accretion and amortization.
What Is Accretion of a Discount? Accretion of discount is the increase in the value of a discounted instrument as time passes and the maturity date looms closer.
How does accretion of a discount work? A bond issued at a discount has a value that is less than the par value. As the bond approaches its redemption date, it will increase in value until it converges with the par value at maturity. This increase in value over time is referred to as an accretion of discount. For example, a three-year bond with a face value of $1,000 is issued at $975. Between issuance and maturity, the value of the bond will increase until it reaches its full par value of $1,000, which is the amount that will be paid to the bondholder at maturity.
Accretion can be accounted for using a straight-line method, whereby the increase is evenly spread throughout the term. Using this method of portfolio accounting, accretion of discount can be said to be a straight-line accumulation of capital gains on a discount bond in anticipation of receipt of par at maturity.
Accretion can also be accounted for using a constant yield, whereby the increase is closest to maturity.
What is an amortizable bond premium? The amortizable bond premium is a tax term that refers to the excess price paid for a bond over and above its face value.
A bond premium occurs when the price of the bond has increased in the secondary market due to a drop in market interest rates. A bond sold at a premium to par has a market price that is above the face value amount.
The difference between the bond's current price (or carrying value) and the bond's face value is the premium of the bond. For example, a bond that has a face value of $1,000 but is sold for $1,050 has a $50 premium. Over time, as the bond premium approaches maturity (or in some cases the call date), the value of the bond falls until it reaches par at maturity date/call date. The gradual decrease in the value of the bond is called amortization.
If you have additional questions regarding these or other bond accounting terms, please reach out to the Operations team or your sales representative in the Capital Markets Group of Country Club Bank.
This information is intended for institutional investors only. The material provided in this document/presentation is for informational purposes only and is intended solely for private use. Past performance is not indicative of future results. This material is not intended as an offer or solicitation for the purchase or sale of any financial instruments.
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