What is the current discount on a 30 yr. zero coupon bond? Where to find this info?

Question

Can some help me with zero coupon bonds? I am looking for the current discount. What interest rate is this discounted at? Fed Funds, Discount, other?

Thanks,

Mac

Answer 1

U S government zero coupon bonds the furthest out currently quoted is 5/15/2030 33.554 ask to yield 4.87%. The discount is set by the market to give a particular yield, so the discount will vary from day to day.

There are also quite a few municiples offered with zero coupon. They have the disctint advantage of having no current taxes due. Zero coupon U S governments do, if they are not in a tax deferred account.

Virginia St. Water and Sewer due 11/1/2020 offered at 53.13 to yield 4.87% to maturity. AA rated.

Pittsburg Water and Sewer due 9/1/2026 offered at 39.27 to yield 4.98% AAA rated.

Answer 2

You can get yields and prices for zero coupon bonds in the Wall Street journal. They used to publish them every day -- but may now only do it once a week. Prices can also be found on various pricing services like Bloomberg -- but this is not cheap.

The discount is a yield. It is expressed as a nominal rate with two compounding periods per year (e.g., if the rate is 5% per year, it really means 2.5% per half year compounded every six months).

The Fed Funds rate is not used. Fed funds are deposits that banks are required to make with the Federal Reserve. The rate is used by large banks who borrow excess federal funds from other banks.

The previous poster is wrong about 30 year bonds. The US did discontinue them during the Clinton years. But because of the large deficit during the Bush administration, they starting issuing them a few years ago.

Answer 3

You could check the Wall Street Journal or Barron's.

The federal government no longer sells 30 year treasury bonds. Are you aware?