How to calculate the bond price from the yield for 10 Year Treasuries?
So I’m using historical bond yield data of US 10 year treasuries all the way back to 1871 from this cool site: http://www.multpl.com/10-year-treasury-rate/table/by-year
I calculated the bond price by inverting the yield (1/yield) and indexing the price to 100 on 1871.
This is what I get for my estimation of the bond prices (see attached graph).
However I’m not sure if this is the right approach because from 1941 – 1982 it shows that bond prices crashed by -87%. Whereas in reality the maximum historical decline in bond prices was about -20 to -30%, a figure I think I read in one of your articles and elsewhere.
So what am I missing here? How is the 10 year bond price supposed to be estimated from the yield? I know you probably need the coupon rate and maturity dates for an accurate calculation. But for a rough back-of-the-hand calculation with just yield data, what is the correct approach to calculate the price for 10 year treasuries?
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