Bond Markets For Dummies; Treasuries 101

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tx_floods's picture
tx_floods
Status: Silver Member (Offline)
Joined: Feb 28 2009
Posts: 155
Bond Markets For Dummies; Treasuries 101

I wanted to start a thread, but I'm hesitant to call this a "definitive" thread. From everything I've read, the entire economic future of the country (and, possibly, the world) depends on our Treasury Bond Auctions. The system is kept alive by selling our debt via Treasury Securities, both short and long term. If the bond market is that important to the system, seems reasonable I should try to learn more about the details of how that system works. I know CM has posted lots and lots of info about the bond market, but I'm hoping to get something more "dumbed-down" to reach the average guy. Everything I've read seems to assume that there is some beginning knowledge of how the thing works. I am hoping that the wisest among you can not only explain, but also interperet the results of the auctions. Maybe as the auctions continue, this thread can become the place where the Sherpas can guide us neophytes.

Here's the auction schedule through Nov 2, 2009: 

http://www.treas.gov/offices/domestic-finance/debt-management/auctions/auctions.pdf

Here are the auction results for the seven-year notes, auction held today: (June 25, 2009)

http://www.treasurydirect.gov/instit/annceresult/press/preanre/2009/R_20090625_1.pdf

Now, does anybody have any commentary on how to read and then interpret these numbers? Remember, I'm a simple guy: Use small words. Some of the questions I would have are: Aside from the obvious, what are the differences between the various terms of securities? For instance, compare the 7 year with the 30 year auction held recently. What's the difference between interest/yield/price, and how do those function against one another?

Maybe this is a topic for the "markets" forum, but I thought it would get better exposure here. If it need to be moved, please do so. Also, I'm sure there's a real "dummies" book out there, but I love the knowledge base of the real folks here at CM! Thanks for any info you can share.

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