Average coupon & return on gov bond

CFA Level III
#1

Greetings,

i am writing with reference to mock exam: ©2024 Financial Exam Help 123™. 2024 Afternoon Mock Exam #4 Full Guideline Answers (BCIII) Q.9.2

BCIII has concluded that yields were increasing because return on government bonds in BM portfolio is less than the average coupon for that maturity.

i want to affirm my understanding for the concept, detailed on below points:
1- Government bonds are sold (at issuance) at bar value, this is where YTM = Coupon rate
2- When trading price for bond fall below bar, explained by a higher discount factor, it reflect an increase on future/current interest rates

Do i understand this correctly ?
thx

#2

  1. Government bonds are not necessarily issued at par. The coupon rate is set in advance of the auction, and the investing market determines the price.

  2. It reflects an increase in current interest rates, not necessarily future interest rates.

#3

Great ! thank you clarification.

#4

My pleasure.