Question

Treasury bill yields are very low these days; often below a tenth of a percent. You see the Treasury bill quote below from September 8, 2009. Calculate the bid-ask spread in dollars for a $10,000 Treasury bill.

Maturity Bid Ask Chg. Ask Yield

2009 Oct. 8 0.095 0.088 +0.003 0.089

Answer 1

Bid Value in Dollars

Bid Rate = 0.007917 [0.095 x (30 Days / 360 Days)]

Bid Value in Dollars = $9,920.8 [$10,000 x (1 - 0.007917)]

Ask Value in Dollars

Ask Rate = 0.007333 [0.088 x (30 Days / 360 Days)]

Bid Value in Dollars = $9,926.7 [$10,000 x (1 - 0.007333)]

The bid-ask spread in dollars

The bid-ask spread in dollars = Ask Value in Dollars – Bid Value in Dollars

= $9,926.7 - $9,920.8

= $5.9

“Thus, the bid-ask spread in dollars for a $10,000 Treasury bill would be $5.9”