Par yield and Positive yield curve: Difference between pages

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Today’s market yield on a coupon paying bond trading at par and redeemable at par
This means that prevailing market yields are higher for longer maturities.  
= the fixed coupon rate payable on such a ‘par bond’.




'''Example'''
Also known as a 'rising yield curve' or a 'normal yield curve'.
 
The par yield for the maturity 0-3 periods is 1.90% per period.
 
This means that a deposit of £1,000,000 at Time 0 periods on these terms would return:
 
*Interest at a rate of 1.90% per period on the original £1,000,000, at Times 1, 2 and 3 periods, and
*The principal of £1,000,000 at Time 3 periods
 
 
The interest payments will be £1,000,000 x 0.019 = £19,000 per period
 
The total repaid at Time 3 periods will be: principal £1,000,000 + £19,000 interest = £1,019,000.
 
 
An application of par yields is the pricing of new coupon paying bonds.
 
 
The par yield is known as the Par rate, Swap rate or Swap yield.
 
 
'''Conversion'''
 
If we know the par yield, we can calculate both the [[zero coupon yield]] and the [[forward yield]] for the same maturities and risk class.
 




== See also ==
== See also ==
* [[Bond]]
* [[Falling yield curve]]
* [[Bootstrap]]
* [[Flat yield curve]]
* [[Coupon bond]]
* [[Forward yield]]
* [[Forward yield]]
* [[Market yield]]
* [[Negative yield curve]]
* [[Par]]
* [[Par yield]]
* [[Swap spread]]
* [[Rising yield curve]]
* [[Yield curve]]
* [[Yield curve]]
* [[Zero coupon yield]]
* [[Zero coupon yield]]
* [[Flat yield curve]]
 
* [[Rising yield curve]]
[[Category:The_business_context]]
[[Category:Long_term_funding]]
[[Category:Cash_management]]
[[Category:Financial_products_and_markets]]
[[Category:Liquidity_management]]

Latest revision as of 13:35, 16 June 2020

This means that prevailing market yields are higher for longer maturities.


Also known as a 'rising yield curve' or a 'normal yield curve'.


See also

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