Re: T-bond holding period

[wfhummel@xxxxxxxxxxxxxx (William F. Hummel)]

On Wed, 8 Oct 1997 Doug Henwood wrote:

>William F. Hummel wrote:
>
>>>Except that the average holding period for a US Treasury long bond is about
>>>30 days.
>>-----------
>>Please quote your source.
>
>If I may indulge in the great PKT practice of citing myself, here's a
>passage from page 25 of my book Wall Street (Verso, $25):
>
>"The Bank for International Settlements (Benzie 1992, p. 43) estimated that
>the average holding period for U.S. Treasury bonds and notes was just one
>month, with a similar figure prevailing in Japan, Germany, and Britain. The
>average holding period for a Treasury bill was three weeks, ten weeks short
>of the shortest-lived T-bill."
>
Thanks for the reference, but it does not address the issue I
raised in the same message:

"I would note that THE long bond is traded very actively.  Most
other long maturity bonds are traded much  less actively.  So it
would seem necessary to apply a weighting factor versus maturity
in generating a meaningful average holding period."

The point I am suggesting is that the average may not be a good
reflection of what is going on.  Some institutions like insurance
companies, foundations, endowments, foreign central banks, etc.
are long term holders of bonds, not traders.  The traders may be
rapidly turning over a small fraction of any particular issue
giving the appearance of a short holding period on average.  I
think one has to look behind the figure quoted by the Benzie in
the BIS before deciding what it really means.

William F. Hummel