How are government bonds quoted?

Government bonds are quoted in 1/32 increments, which is a standard practice in the fixed-income market, particularly for U.S. Treasury securities. This method of quoting reflects the bond's price as a percentage of its face value, making it more precise, especially for bonds that can have very small variations in price.

Quoting bonds in 1/32 increments allows for a more accurate representation of market values since the prices of bonds can be relatively close to one another. For instance, if a bond is quoted at 102-16, this indicates that the bond is trading at 102 and 16/32 percent of its par value. This system helps traders and investors to negotiate better and execute transactions at more defined prices.

Understanding the quoting increments is crucial for market participants as it influences how they assess the value of the bonds they buy or sell, impacting their decisions and strategies in the bond market.