Treasuries Coupon Differences

[doodle]

I might have asked this question once before but can anyone think of any advantage what so ever to purchasing LT treasuries with a higher or lower coupon payment, even though the purchasing price makes up the difference? For example, is a bond with a coupon of %3.125 priced at $96 dollars identical in all ways to a bond with a coupon of %3.75 priced at 109?

[melveyr]

Everything else being equal, a lower coupon bond is more volatile. They are more volatile because the principal repayment takes a larger portion of the cash flows, and the principal repayment has to get discounted back 30 years. Where as the other payments get discounted back 1,2,3,4,5,6,7,8 etc. years.

I think the LTT portion can handle a little more juice so I prefer to buy the lower coupon bonds if given the choice.

[MediumTex]

Everything else being equal, a lower coupon bond is more volatile. They are more volatile because the principal repayment takes a larger portion of the cash flows, and the principal repayment has to get discounted back 30 years. Where as the other payments get discounted back 1,2,3,4,5,6,7,8 etc. years.

I think the LTT portion can handle a little more juice so I prefer to buy the lower coupon bonds if given the choice.

That was Harry Browne's recommendation as well.

[dualstow]

That's good to know. I tend to buy at auction, rather than secondary, so I don't usually have a choice. Bought some new bonds on Thursday. Although I can choose exactly how many bonds I want (in Fidelity), I'm never quite sure exactly how much I'm going to spend. Perhaps on the secondary market I could choose more efficiently and not have leftover cash.