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American Capital Agency Corp. Message Board

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  • onion1273 onion1273 May 7, 2012 9:05 AM Flag

    Investing thoughts

    NONO you guys misunderstood me.

    In the world of bonds, when there is bad news and you are buying bonds at a depressed price,

    depressed prices affect shorter bonds more than they do longer bonds.

    When fund managers were dumping say, Countrywide bonds back when the Mozillo scandal hit the papers , The 3yr bonds were at 14% but the 10yr bonds were at 10% ( thats why I say I should have bought those 10yrs.)
    Price movement affects a shorter bond more than it does a longer bond. Maturity is part of the equation.
    So all things being equal if suddenly, all bonds are selling say 10% lower in price,
    the shorter bond will have the higher yield.

    Even today with a positive yield curve...
    If I were to take 10% off the price of all us Treasuries (steep yield curve)

    The 2yr treasury today price = 100 yield 0.25%
    the 10yr treasury today price 101-7/32 yield 1.86

    ok lets say Obama reveals himself as the Anti-Christ and we take 10% off the price of all UST

    2yr @ 90 = 5.66%
    10yr @ 91-7/32 = 3.046%

    I hope this makes sense, didnt mean to confuse anyone.

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