Relative Value of Government of Canada Bonds

Jean-Sebastien Fontaine, Jabir Sandhu and Adrian Walton

No 2019-23, Staff Analytical Notes from Bank of Canada

Abstract: Government of Canada bonds in circulation that promise very similar payoffs can have different prices. We study the reason for these differences. Bonds that trade more often and earn high rental income in the repurchase agreement (repo) market tend to have higher prices. Bonds with longer tenors and times to maturity tend to have lower prices. This contrast between cheap and expensive bonds is important because trading volume and rental income can change rapidly, unlike tenor and time to maturity, which are stable.

Keywords: Financial; markets (search for similar items in EconPapers)
JEL-codes: G10 G11 G12 G23 G32 (search for similar items in EconPapers)
Pages: 9 pages
Date: 2019-08
New Economics Papers: this item is included in nep-fmk
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