mkultrawide [any]

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Joined 3 years ago
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Cake day: August 2nd, 2022

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  • The bonds in the market are for money that have already been borrowed by the Treasury. Whoever holds the bond will receive the interest payments and principal at maturity, but the Treasury already got the money. The concern is that, if you have a bunch of bonds that are priced low on the secondary market (and thus have a high yield to maturity) that the Treasury will have offer even more interest on new debt to make it lucrative for investors to buy. Those Treasury yields are also used as a benchmark for stuff like mortgage rates or credit card interest rates (10 Year Treasury Yield + X% interest) and are highly correlated with the Secured Overnight Financing Rate (SOFR) which is widely used as the basis for commercial/corporate debt interest rates (SOFR + X%).