Illya Gerasymchuk
Entrepreneur / Engineer
now the bank has an issue - the 1.5% liability payment is in 6 months, while 4% yield from the asset financed by that liability only gets paid in 1 year while the bank will have the money to pay in the future - it doesn't have it now
what would happen if the bank issued bonds with a semi-annual coupon instead? semi-anual coupon means that bondholders get 2 ≈1.5% interest payments in the year: at 6 months, and maturity remember: the UST bond only has one payment - at maturity in 1 year (think zero-coupon)