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Keywords:Government securities 

Journal Article
Should we worry about the inverted yield curve?
AUTHORS: Vilan, Diego
DATE: 2007

Journal Article
New model identifies optimal conditions for calling U.S. Treasury bonds
AUTHORS: anonymous
DATE: 1996-04

Journal Article
Treasury securities offered in smaller amounts
AUTHORS: anonymous
DATE: 1998-10

Journal Article
Securities services programs continue to evolve
AUTHORS: Fleming, Sharon
DATE: 1992-01

Journal Article
Bureau of Public Debt ends window services at Fed banks
AUTHORS: anonymous
DATE: 1999-07

Journal Article
Single-price Treasury auction experiment continues
AUTHORS: Thompson, Stephen
DATE: 1993-01

Journal Article
Treasury auction process changing
AUTHORS: anonymous
DATE: 1992-04

Journal Article
Special repo rates: an introduction
Transactions involving repurchase agreements (known as repos and reverses) are important tools the Federal Reserve uses in implementing monetary policy. By undertaking such transactions with primary dealers, the Fed can temporarily increase or decrease the quantity of reserves in the banking system. The focus of this article is the repo market, especially the role the market plays in the financing and hedging activities of primary dealers. The author explains the close relation between the price premium that newly auctioned, or on-the-run, Treasury securities command and the special repo rates on those securities. The author's analysis demonstrates that the rents that can be earned from special repo rates are capitalized into the price of the underlying bond so as to keep the equilibrium rate of return unchanged. ; The discussion begins with a description of repos and reverses, the difference between on-the-run and older securities, and the ways dealers use repos to finance and hedge. The article then examines the difference between general and specific collateral, defines the repo spread and dividend, presents a framework for determining the equilibrium repo spread, and describes the average pattern of overnight repo spreads over the auction cycle. Finally, the article discusses convergence trades and repo squeezes. Two appendixes provide detailed analysis.
AUTHORS: Fisher, Mark
DATE: 2002-04

Journal Article
To call or not to call?: optimal call policies for callable U.S. Treasury bonds
Until 1984, the U.S. Treasury typically issued its long-term bonds in callable form. A number of these securities, totaling $93.8 billion in face value, remain outstanding. After a call protection period, usually five years prior to maturity, the Treasury can call the bonds but must give prior notification of intent to call. This article develops a decision rule, which takes account of the prior notification requirement, when it is optimal to call such bonds. ; The decision of whether to call is based on the current level of interest rates and their volatility. For a call to be optimal for the Treasury, interest rates must be sufficiently low (relative to the bond's coupon) and the potential benefits of waiting--on the chance of even lower interest rates--should be insufficient to compensate for the costs of continuing to pay the higher coupon rate for another six months. After developing these ideas, the authors use a numerical example to demonstrate their application. They conclude that, at least in recent years, the Treasury has called bonds optimally. The model they use, which is also applicable to agency, corporate, and municipal callable bonds, specifies conditions under which the Treasury should call outstanding callable bonds in the future.
AUTHORS: Bliss, Robert R.; Ronn, Ehud I.
DATE: 1995-11

Working Paper
Callable U.S. Treasury bonds: optimal calls, anomalies, and implied volatilities
Previous studies on interest rate derivatives have been limited by the relatively short history of most traded derivative securities. The prices for callable U.S. Treasury securities, available for the period 1926?95, provide the sole source of evidence concerning the implied volatility of interest rates over this extended period. Using the prices of callable, as well as non-callable, Treasury instruments, this paper estimates implied interest rate volatilities for the past seventy years. Our technique for estimating implied volatilities enables us to address two important issues concerning callable bonds: the apparent presence of negative embedded option values and the optimal policy for calling these, and similarly structured, deferred-exercise embedded option bonds. ; In examining the issue of negative option value callable bonds, our technique enables us to extend significantly both the sample period and sample breadth beyond those covered by other investigators of this phenomenon and to resolve the inconsistencies in their results. We show that the frequency of mispriced bonds is time-varying and that there also exist irrationally underpriced bonds. Critically, both anomalies are shown to be related to volatility-insensitive, away-from-the-money bonds. ; In contrast to the naive call decision rules suggested by previous authors, we develop the option-theoretic optimal call policy for deferred-exercised "Bermuda"-style options for which prior notification of intent to call is required. We do this by introducing the concept of "threshold volatility" to measure the point at which the time value of the embedded call option has been eroded to zero. By using this concept, we address the valuation of such bonds and document the frequent optimality of the Treasury's past call decisions for U.S. government obligations.
AUTHORS: Bliss, Robert R.; Ronn, Ehud I.
DATE: 1997

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