I am a programmer that has been working for fixed income financial companies for the past couple of years. As such, I have learned about a weird notation on fixed income products.

In the US, bonds are priced in 1/32 increments ("a tick") or 1/64 increments ("a plus").

Wikipedia explains the usage:

...a price is quoted as 99-30+, meaning 99 and 61/64 percent (or 30.5/32 percent) of the face value. As an example, "par the buck plus" means 100% plus 1/64 of 1% or 100.015625% of face value.

But in Europe, they are priced in 1/100 increments, represented in decimal.

I can't find much on the history of this system - why it's priced this way, notated this why, and why it only seems to be the US.

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    $\begingroup$ You have to remember that it wasn't so long ago that these markets were all paper and pencil ledgers and verbal trading. It is a lot easier to memorize and do the math of 8th and 16th in your head, quickly, especially when the figure wasn't changing that often and you traded round lots. Regulators felt that investors were at too much of a disadvantage to the market makers however, so they narrowed spreads by instituting 32nds and 64ths. It also allows for greater spreads. 0.005625 makes a big difference when you are trading in lots of 10MM and more, which you lose if you go to 1/100ths. $\endgroup$ – AMR Dec 31 '15 at 2:32
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    $\begingroup$ You actually might get a better answer to this particular question on Personal Finance & Money SE. There is probably an old bond trader lurking that remembers what it was like back in the day. It is more of a financial markets question than a math history one. $\endgroup$ – AMR Jan 2 '16 at 0:16

The US debt markets are a relatively recent addition to the financial markets - the US government did not issue debt until the early twentieth century.

When the US debt markets started trading, they took their cue from the already established US stock markets where prices were quoted in eighths.

The site How Stuff Works give the following description of this tradition:

These early stockbrokers looked to Europe for a model to build their system on and decided to base it on the system of Spain. This was largely due to the fact that the U.S. dollar's value had been based on the value of the Spanish real.

The real was the Spanish silver dollar and was divided into eight parts.

This strongly implies the following route to thirty-seconds, which I give as an "educated guess" without reference:

As market liquidity increased, pressure on the bid/offer spreads prompted brokers (buyers and sellers) to "meet half way", thus introducing sixteenths pricing. Continued increasing liquidity and a "meet half way" attitude finally introduced thirty-seconds pricing. (Each of these pricing refinements would have cut into the brokers profit margins, so their loss would have to have been made up by increased liquidity. Otherwise, they would have resisted the change.)

This would then be the pricing practise inherited by the debt markets when they started trading in the early 20th century. The later introduction of options trading and the "hyper-liquidity" of modern debt markets introduced the final refinement of sixty-fourths.

As late as 1997 some of the older stocks in the stock market were still quoting in 32nds. This ended with the introduction of the "Common Cents Stock Pricing Act". The debt markets however appear to have decided to stick with the historic pricing practice, perhaps because the nominal price of a treasury bond is $1000 making further fractional price increments cutting into the brokers spreads undesirable to the market makers.


I can only speculate that it is the legacy of peso de ocho popularity. The "piece of eight" coin was often physically cut into 8 bits (mostly to obtain change - a solid peso contained too much value for everyday circulation, almost an ounce of fine silver). The bit was still large enough to accurately halve and even quarter it, giving 1/16 and 1/32 of original value.

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    $\begingroup$ Not likely. More the ease of doing the math in your head, quickly in the days before computer trading when quotes were in 8ths and 16ths. You just remembered the 4ths and halved or quartered those. with a little practice you can rattle off this prices very fast. It takes longer if you have to work out the price at par and 42 on an odd lot. $\endgroup$ – AMR Dec 31 '15 at 2:37

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