Walt Street has observed that a Treasury note maturing in November of 2019 and paying a 3.375% coupon has a bid price of 105:25 and an ask price of 105:26.In this instance, what is the dealers' spread for every $1,000 of par value?

Question

Quizplus · Accepted Answer

For every $1,000 of par value, the dealers' spread is $0.31250. The prices of Treasury bonds and notes are quoted in 32^nds of a dollar per $100 of par value. Therefore, the bid price is $105 25/32, or $105.78125, per $100 of par, and the ask price is $105 26/32, or $105.8125 per $100 of par. The difference between the two is the dealers' spread per $100 of par value, or $0.03125. The question asks for the dealers' spread for every $1,000 of par value, so this must be multiplied by 10: $0.03125 x 10 = $0.31250.

Walt Street Has Observed That a Treasury Note Maturing in November