---------------------------> Joel R. Anderson
18 May 2000
Hon. Michael W. Sunner, Deputy Asst. Comm.
Department of the Treasury
Bureau of the Public Debt
Washington DC 20239-0001
Dear Commissioner Sunner:
Thank you for your gentle correction of 1Mar00 to my
12Jan00 reporting errors in interest rate computations.
I was using an old, out-of-date formula, you supplied
the current, correct formula.
From your website, this (quote):
Prices, Rates, and Yields
Treasury bill auction results provide
information about the range of accepted
discount rates and their equivalent prices and
investment rates. The discount rate is an
annualized rate of return based on the par
value of the bills. The investment rate, or
equivalent coupon yield, is an annualized rate
based on the purchase price of the bills and
reflects the actual yield to maturity. Both
rates are calculated on the actual number of
days to maturity. The discount rate is
calculated on a 360-day basis (twelve 30-day
months). The investment rate or equivalent
coupon yield is calculated on a 365-day basis
(or on a 366-day basis during leap year).
Q1: I was surprised to discover that Treasury computed
the Investment Rate on my 3-mo T-bill (CUSIP 912795EV9)
on a 365-day basis in this a leap year with 366 days.
Upon computing *all* the Investment Rates I could find
easily, I discovered that Treasury (apparently) only
computes a 366-day Investment Rate when the T-bill
includes 29Feb between Issue and Maturity dates - this
is NOT what it says on your website. See: TBIL_DAT.XLS
Joel Anderson, 18 May 2000, page 2
In my view, all Treasury borrowing should be specified
in Federal Reserve Reg. DD Truth-in-Savings APY_365-day,
it would eliminate a lot of unnecessary computation.
I do not understand why some T-bill Discount Rates are
only given to 2 decimal places. Or why corresponding
Investment Rates are only reported to 2 decimal places
when 3 decimal places can be as easily calculated.
Q2: Note and Bond auction results. See: TNOT_DAT.XLS.
I can confirm the Investment Rate for Notes and Bonds
for *full* years; 2, 5, 10, 30; with the exception of
10-yr Note CUSIP 9128275W8 for which I calculate an
Investment Rate of 4.337 and for which Treasury
published an Investment Rate of 4.338.
I can't confirm the Investment Rate for any Notes and
Bonds that include months; 3-months, 6-months, 9-
months. The 29-year, 6-month Bond, CUSIP 912810FH6, is
a particular problem. The Treasury Interest Rate for
this Bond is 3.875, the Treasury Yield is 4.138%. I
calculate a Yield of 4.051 and an APY of 4.092. The
Treasury Yield is *above* my calculated APY (Truth-in-
Savings APY), which is highly unusual - an APR is never
higher than an APY.
How does Treasury calculate the Yield on Notes and
Bonds that include months in addition to years; that
is, Bonds like CUSIP 912810FH6?
Very truly yours,
Joel R. Anderson
Recent Treasury Bill Auction Results (source data
Recent Treasury Note and Bond Auction Results
(source data for TNOT_DAT.XLS and TNOT_DAT)