January 27th, 2008 11:04 am | by John Jansen |

Last week brought the lowest yield ever recorded for a 30 year bond (4.10 percent) in my three decades of observing daily interest rate movements. Similiarly,the yield on the 2 year Treasury slipped below the 2.00 percent level. The last time that issue traded that low in yield was in the deflation scare of 2003.

Against that background I thought it would be fun to list the largest coupons ever issued by the Treasury. They all ocurred in 1981 and were rather chunky by any standard. Paul Volcker was Fed Chairman and a former actor named Ronald Reagan was President.They were  on a mission to reform  and reshape the economy following the malaise which gripped the economy in the 1970s.

Volcker aimed to crush inflation and inflationary expectations and employed the tools of monetary policy as blunt force instruments.  He changed the way the FOMC conducts monetary policy and ushered in an era of unheard of volatility .(Prior to his reign the bond market had been a sleepy backwater.)In his zeal the Federal Funds rate actually averaged over 20 percent in the first week of 1981.

So these  ( I believe) are the highest coupons ever issued for the various maturities of Treasury debt as they existed in 1981.

In August the Treasury issued the 16.25 08/31/83, a 2 year note.

In November the 3 year note came with a 16.00 coupon,the 16s of Nov 1984

The Treasury issued quarterly 4 year notes back then in March ,June,September and December. The winner was the 15.875s of September 1985. If I recall correctly, that issue was largely owned by the Saudi Arabian Monetary Authority and the Bundesbank.

The 5 year note was also issued quarterly and I will have to check on this but I believe it was actually a 62 month issue. I do not recall the month of issuance but the security was the 16.125s of November 1986.

The Treasury had a maturity for everyone in those days and the 7 year note was the 15.375s of October 1988.

The record holder in the 10year bucket was the 14.875s of August 1991.

The Treasury offered 20 year bonds at that time. There was a hump in the curve between the 10 year and the 30 year and one could pick up 20 year paper as much as 25 basis points cheap to bonds. The record holder here is the very robust 15.75s of November 2001. The auction that day was rather sloppy and that bond traded damn near 16 percent in the post auction trading.

The highest coupon in 30year bond land was the 14s of November 2011. They had a colorful history. The period between the announcement of the auction of a bond and its settelment(the when issued period) was protracted in those days relative to the shortened period today. Well, when trading began on a when issued basis on that  issue in late October 1981 it first changed hands around 15.50 percent. By the time of the auction when the coupon was actually established the bond had rallied about 150 basis points and was awarded the 14 percent coupon.

I did this from memory and if there are other oldtimers reading this who wish to correct my failing memory or add something of their own,please feel free to do so.


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  1. One Response to “History”

  2. By bill wachtel on Jul 31, 2008 | Reply

    jjj, very fascinating!!!

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