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Chat GPT came up with basically the same answer I was thinking
for this question, but I was still amazed at how quickly it
produced the answer. FA's everywhere crossing their fingers and
hoping people don't get too familiar and comfortable asking LLM's
questions! The only flaw I could spot in Chat GPT's logic is that
it didn't put together that the loss was unrealized. If it was
realized, then the question to roll or not to roll would be a moot
point. Still impressive.
Question: I have a 2 year treasury note with a 4.375% yield
payable semi annually. The current yield on the same duration note
is 5%. I have a .9% loss on my current note. Should I roll to a new
2 year note at the higher yield or hold on to current one until
Answer: To determine whether you should roll your current 2-year
Treasury note into a new 2-year note with a higher yield or hold
onto your current one until maturity, you should consider a few
Current Yield vs. Yield at Purchase:
The .9% Loss:
Time to Maturity:
Future Interest Rate Expectations:
Ultimately, the decision to roll over your current note or hold
it until maturity depends on your individual financial goals, risk
tolerance, and market expectations. You may want to consult with a
financial advisor who can provide personalized advice based on your
specific situation and objectives.
Re 2 Yr note question: The 3 month Treas.= 5.56%. Hold until
maturity, take your YTM, role principle into another 3 month of
higher interest. Repeat. Works well.
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