Hi C, Glad you found the vid helpful and I hope that you find other vids on my channel equally informative. This vid is one of a series of eight that together comprise a fairly comprehensive intro the the fixed-income markets. There are also several dozen other videos on a variety of topics, though most are related to fixed-income or derivatives. Cheers, Doug.
I wanted to thank you for these videos. It's been a shame to see it has so little attention when their is so much content. It seems in the world of 5 minute quick explanations, no one wants to understand anything with depth. This has been a great addition to the business courses I've been taking in college. Thank you!
Thanks for your most gracious compliment. I would wish my view counts were rising more rapidly, but I'll take the slow but steady growth seen over the last year. I believe (hope?) quality will out in the longer run. And I do have about 2 dozen short-form vids (most 5-15 minutes) that might be more digestible for those with shorter attention spans. Please share any of my vids you find helpful/informative with colleagues and friends. Thanx again for your kind words. Cheers, Doug
Hello Doug, I've watched a few of your videos (and am currently watching/studying this video) and they have all been very helpful. I was wondering if you could explain to me what it means to "refund a lot of t-bills". I heard someone say this and I don't understand what it means and can't find any useful information on it. I think it affects the supply of t-bills? Thanks for your videos!
Hi David, Thanks for your kind words re my RUclips vids. Glad you've found a few of them helpful. As to "refunding": Though the word is sometime used a bit casually, it has a very specific meaning when used by knowledgeable fixed-income market participants. Technically, a refunding issue (i.e., sale of new securities) is a sale of bonds for which the issuer has specified that the debt offering proceeds will be used to retire already outstanding debt. The debt to be retired may be about to mature or it may be bonds the issuer intends to retire prior to maturity via a call. The intended use of the money raised through a sale of new debt securities is information which issuers usually provide in the offering documents or other sale related disclosures. If you consider US Treasury offerings, many of the new issue bills, notes and bonds are designated as "refunding issues".
No, once a T-note, always a T-note. At least that is the convention in the US. The 3 major categories of US Treasury securities are bills (one year or less to maturity at issuance), notes (1-10 years to maturity at issuance) and bonds (> 10 years to maturity at issuance). Whatever the category at issuance, a security carries that designation all the way until it matures. For instance, assuming the 10-year T-notes being issued this month (August 2021) carry a 1% coupon, they will be designed at the 1's of August 2031 until they are retired, and be considered T-notes for the entirety of their existence. For some purposes the continuing designation based on maturity at issuance is inconsequential. Most investors would find the 10-year note issued 8 years ago a near perfect substitute for a newly issued 2-year note (though the coupons are likely a bit different, and the new security will be slightly more liquid). However, the distinction matters for some purposes. To be good for delivery against a Treasury futures contract, the original designation matters. For example: to be eligible for delivery against the 10-year T-note futures contract the security must have between 6 ½ and 10 years to maturity and have been issued as a T-note. In other words, a 30-year T-bond issued between 20 and 23 ½ years ago has a time to maturity that fits the terms of the delivery, but the bond would not be eligible for delivery since it was not issued as a T-note. The distinction comes into play in a variety of other circumstances, such as the reconstituting of bonds or notes from Treasury strips. To further complicate matters, different countries use their own conventions. In the UK for example, securities are characterized by the remaining time to maturity. A Gilt (i.e., UK government bond) issued with an original maturity of 50 years is considered a long maturity bond at issuance. However, 48 years after issuance, when only 2 years remain until its maturity, the security would be considered a short-dated or short-maturity bond.
@@insidersguidetofinance1388 Hi Doug. Always really appreciate your replies. I plan on watching more of your videos on this channel but in the future, if I wanted to dive a bit deeper and purchase your book how can I do that? I would prefer an electronic copy if that is available.
Awesome material. Great stuff. Thanks for sharing your expertise!
Hi C, Glad you found the vid helpful and I hope that you find other vids on my channel equally informative. This vid is one of a series of eight that together comprise a fairly comprehensive intro the the fixed-income markets. There are also several dozen other videos on a variety of topics, though most are related to fixed-income or derivatives. Cheers, Doug.
I wanted to thank you for these videos. It's been a shame to see it has so little attention when their is so much content. It seems in the world of 5 minute quick explanations, no one wants to understand anything with depth. This has been a great addition to the business courses I've been taking in college. Thank you!
Thanks for your most gracious compliment. I would wish my view counts were rising more rapidly, but I'll take the slow but steady growth seen over the last year. I believe (hope?) quality will out in the longer run. And I do have about 2 dozen short-form vids (most 5-15 minutes) that might be more digestible for those with shorter attention spans.
Please share any of my vids you find helpful/informative with colleagues and friends. Thanx again for your kind words. Cheers, Doug
Hello Doug, I've watched a few of your videos (and am currently watching/studying this video) and they have all been very helpful. I was wondering if you could explain to me what it means to "refund a lot of t-bills". I heard someone say this and I don't understand what it means and can't find any useful information on it. I think it affects the supply of t-bills? Thanks for your videos!
Hi David, Thanks for your kind words re my RUclips vids. Glad you've found a few of them helpful.
As to "refunding": Though the word is sometime used a bit casually, it has a very specific meaning when used by knowledgeable fixed-income market participants. Technically, a refunding issue (i.e., sale of new securities) is a sale of bonds for which the issuer has specified that the debt offering proceeds will be used to retire already outstanding debt. The debt to be retired may be about to mature or it may be bonds the issuer intends to retire prior to maturity via a call.
The intended use of the money raised through a sale of new debt securities is information which issuers usually provide in the offering documents or other sale related disclosures. If you consider US Treasury offerings, many of the new issue bills, notes and bonds are designated as "refunding issues".
What happens to a 10 year treasury 9 years after issuance? Does it get sold in the market as a 1 year t-bill?
No, once a T-note, always a T-note. At least that is the convention in the US. The 3 major categories of US Treasury securities are bills (one year or less to maturity at issuance), notes (1-10 years to maturity at issuance) and bonds (> 10 years to maturity at issuance). Whatever the category at issuance, a security carries that designation all the way until it matures. For instance, assuming the 10-year T-notes being issued this month (August 2021) carry a 1% coupon, they will be designed at the 1's of August 2031 until they are retired, and be considered T-notes for the entirety of their existence.
For some purposes the continuing designation based on maturity at issuance is inconsequential. Most investors would find the 10-year note issued 8 years ago a near perfect substitute for a newly issued 2-year note (though the coupons are likely a bit different, and the new security will be slightly more liquid).
However, the distinction matters for some purposes. To be good for delivery against a Treasury futures contract, the original designation matters. For example: to be eligible for delivery against the 10-year T-note futures contract the security must have between 6 ½ and 10 years to maturity and have been issued as a T-note. In other words, a 30-year T-bond issued between 20 and 23 ½ years ago has a time to maturity that fits the terms of the delivery, but the bond would not be eligible for delivery since it was not issued as a T-note. The distinction comes into play in a variety of other circumstances, such as the reconstituting of bonds or notes from Treasury strips.
To further complicate matters, different countries use their own conventions. In the UK for example, securities are characterized by the remaining time to maturity. A Gilt (i.e., UK government bond) issued with an original maturity of 50 years is considered a long maturity bond at issuance. However, 48 years after issuance, when only 2 years remain until its maturity, the security would be considered a short-dated or short-maturity bond.
@@insidersguidetofinance1388 Hi Doug. Always really appreciate your replies. I plan on watching more of your videos on this channel but in the future, if I wanted to dive a bit deeper and purchase your book how can I do that? I would prefer an electronic copy if that is available.