Hi all,
Sorry for the newb question, I am trying to understand how bond market auctions work. Can somebody please tell me which of the following two scenarios is really the case![Big grin :D :D](data:image/gif;base64,R0lGODlhAQABAIAAAAAAAP///yH5BAEAAAAALAAAAAABAAEAAAIBRAA7)
scenario 1
==============
1. Company X wants to sell bonds B of duration T.
2. Company X puts B in an auction.
3. The bid-asks are about the face value of B, coupon payments are pre-fixed in USD and the reason people quote yields is that they refer to the internal interest rate (eg xirr in excel).
4. If someone buys B today and wants to hold it till maturity, he doesn't care what the yields are because essentially it's the face value that's determined by the auction.
scenario 2
==============
1. Company X wants to sell bonds B of duration T.
2. Company X puts B in an auction
3. The bid-asks are not about the face value of B but rather about the yield Y_b (? am I getting this wrong?)
4. When bond rates change tomorrow, the buyer of B still gets coupons at the Y_b he bought the bond at.
Sorry for the newb question, I am trying to understand how bond market auctions work. Can somebody please tell me which of the following two scenarios is really the case
scenario 1
==============
1. Company X wants to sell bonds B of duration T.
2. Company X puts B in an auction.
3. The bid-asks are about the face value of B, coupon payments are pre-fixed in USD and the reason people quote yields is that they refer to the internal interest rate (eg xirr in excel).
4. If someone buys B today and wants to hold it till maturity, he doesn't care what the yields are because essentially it's the face value that's determined by the auction.
scenario 2
==============
1. Company X wants to sell bonds B of duration T.
2. Company X puts B in an auction
3. The bid-asks are not about the face value of B but rather about the yield Y_b (? am I getting this wrong?)
4. When bond rates change tomorrow, the buyer of B still gets coupons at the Y_b he bought the bond at.