This section provides a central location for all the FAQs and their answers related to the DVP Service provided of GSD. Please select the FAQ topic your are interested in learning more about from the topics listed below.
DVP FOS FAQs
DVP FOS Key Terms FAQ
General DVP FAQs
It will affect forward cash trades (Buy / Sell) of floating rate issues that have not reached settlement date. It will also affect trades of floating rate issues when the reset date has occurred between submission date and settlement date. The system modification will accommodate and support Agency Floating / Adjustable Rate debt debentures issued by FNMA, Freddie Mac and / or GNMA. The GSD currently supports the fixed income issues of these products and is seeking to expand its product offerings to support floating and / or adjustable rates securities as well.
Traditionally government notes pay a fixed rate of interest to investors. A floating rate note would pay interest that would be adjusted to match market rates aligned by a market index.
The interest rate (or the yield) on a bond falls when prices rise. A negative yield means investors are effectively paying the bond issuer to borrow money from them if held to maturity.
To learn more, check out the video on negative rate yields.
GSD has modified its DVP RTTM® Web application to accept Floating / Adjustable Rate Notes, allow for changing rates. This data will be reflected in the output to participants.
No. A negative real rate of interest occurs when the rate of inflation exceeds the nominal interest received whereas a negative bond yield means that the returns you will receive are negative in nominal terms.
The US Treasury is considering auctioning T-Bills at negative yields. This is due to T-Bills trading at a negative yield in the secondary market. The Fed decided at its May 2012 refunding meeting to not go forward at that time.
GSD would need to be able to accept negative yield cash trades for When Issued TBills, TIPS, Notes and Bonds submitted by FICC GSD Members using existing input methods, mitigate risk on these instruments and report the same back on all current output. However, because of the current low rate environment several other instruments have recently traded at a negative yield, GSD has decided to investigate modifying its systems to include negative yield trades for other instruments.