tag:blogger.com,1999:blog-7073066728112402191.post3076297218313211822..comments2024-03-26T02:08:50.592-05:00Comments on Observations: Interest Rate Forecast for 5-Year Treasury NotesUnknownnoreply@blogger.comBlogger1125tag:blogger.com,1999:blog-7073066728112402191.post-79151250942970001232013-04-02T14:39:19.808-05:002013-04-02T14:39:19.808-05:00Calculating forward bond yields from current ones ...Calculating forward bond yields from current ones like that do not tell you where market participants expect the 5y to be in x years. <br /><br />You have calculated the risk-neutral price i.e. what investors are implicitly willing to pay in yield to lock in the certainty now - basically an insurance premium - also effected by the liquidity of the spot bonds etc. <br /><br />Clearly by construction, if you use a 5y and a 10y bond to calculate the yield of a 5y bond starting in 5y time the total dollar value of buying and reinvesting will be exactly the same as just the 10y. Otherwise your adding $$ into the equation. This does not mean market participants dont to this trade all the time expecting to make money. StrHeadhttps://www.blogger.com/profile/11152462583139695571noreply@blogger.com