Quote conventions

June 12, 2008

Good post from Accrued on the quote conventions for USD bond prices. Accrued notes Bloomberg’s importance in this area, so I’ll add some further info based on quoting conventions for govt bonds on Bloomberg single dealer pages…

  • Bid and ask prices: all dealers quote two prices, the price they’ll buy at – the bid – and the price they’ll sell at, the ask or offer. The spread is the difference between bid and ask. Bloomberg has a feature called ALLQ that will let a user see a stack of dealer quotes ranked by tightness of spread. Some have argued that other factors ought to influence the ALLQ ranking, for instance dealer execution rates. But that’s a question for another day.
  • Clean prices: dealers quote clean prices – that is prices that exclude the interest accrued between coupon payments. Trades are settled as dirty prices, so the seller is compensated for the portion of the next coupon payment he’ll miss.
  • Bid and ask sizes: quoted in millions of the relevant currency. So if I buy 10,000,000 of the on the run Treasury at 99.35, the clean cash amount I pay is 9,935,000, plus accrued.
  • Yield quoted: most euro govies are price quoted, but some are yield quoted. For instance all Euro bills except Italy, and all Swedish.
  • ASM: on Bloomberg single dealer pages dealers often display asset swap margins. One ASM measure is 6M yield/yield – the spread between the bond yield and the matching point on the 6M swap curve.
  • BEI: for inflation linked bond break even inflation may also be on the quote. BEI is the inflation level that will cause a linker to pay the same coupon as a straight bond.
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