In the world of money, it is rare to have to work past 3 decimal places. Bond traders operate on 32nds, so that might present some difficulties, but they really just want rounding at the hundreds.
Now, when you’re talking about central bank accruals (or similar sized deposits) that’s a bit different. In these cases, you have a very specific accrual multiple, multiplied by a balance in the multiple hundreds of billions or trillions. In these cases, precision with regards to the interest accrual calculation is quite significant, as rounding can short the payor/payee by several millions of dollars.
Hence the reason bond traders have historically traded in fractions of 32.
A sample bond trade:
‘Twenty sticks at a buck two and five eights bid’
‘Offer At 103 full’
‘Don’t break my balls with this, I got last round at delmonicos last night’
‘Offer 103 firm, what are we doing’
‘102-7 for 50 sticks’
‘Should have called me earlier and pulled the trigger, 50 sticks offer 103-2’
‘Fuck you, I’m your daughter’s godfather’
‘In that case, 40 sticks, 103-7 offer’
‘Fuck you, 10 sticks, 102-7, and you buy me a steak, and my daughter a new dress’
‘5 sticks at 104, 45 at 102-3 off tape, and you pick up bar tab and green fees’
‘Done’
‘You own it’
That’s kinda how bonds are traded.
Ref:
Stick: million
Bond pricing: dollar price + number divided by 32
Delmonicos: money bonfire with meals served
Now, when you’re talking about central bank accruals (or similar sized deposits) that’s a bit different. In these cases, you have a very specific accrual multiple, multiplied by a balance in the multiple hundreds of billions or trillions. In these cases, precision with regards to the interest accrual calculation is quite significant, as rounding can short the payor/payee by several millions of dollars.
Hence the reason bond traders have historically traded in fractions of 32.
A sample bond trade:
‘Twenty sticks at a buck two and five eights bid’ ‘Offer At 103 full’ ‘Don’t break my balls with this, I got last round at delmonicos last night’ ‘Offer 103 firm, what are we doing’ ‘102-7 for 50 sticks’ ‘Should have called me earlier and pulled the trigger, 50 sticks offer 103-2’ ‘Fuck you, I’m your daughter’s godfather’ ‘In that case, 40 sticks, 103-7 offer’ ‘Fuck you, 10 sticks, 102-7, and you buy me a steak, and my daughter a new dress’ ‘5 sticks at 104, 45 at 102-3 off tape, and you pick up bar tab and green fees’ ‘Done’ ‘You own it’
That’s kinda how bonds are traded.
Ref: Stick: million Bond pricing: dollar price + number divided by 32 Delmonicos: money bonfire with meals served