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Choosing OIS or Government Zero-Coupon Curves for Bond Pricing

Article Quant Q&A · Author: Skittles
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Summary

The document is a question about selecting discount curves for pricing government bonds across developed and emerging markets. It contrasts using overnight index swap rates for each currency with constructing curves from government zero-coupon rates, and asks where to source rates from commercial data vendors or free providers.

It contains no answer, pricing framework, curve construction details, or comparison of the two approaches. The choice depends on the valuation objective and market conventions: OIS curves are commonly used as collateral discount curves, while government curves reflect sovereign borrowing yields and may incorporate credit, liquidity, and supply effects. Those curves are therefore not interchangeable. The document identifies a broad cross-country data need but gives no guidance on instrument availability, curve quality, or treatment of markets where OIS markets are limited.

Key ideas

  • The question compares OIS discount curves with government zero-coupon yield curves for sovereign bond valuation.
  • Curve selection depends on the pricing objective and relevant market conventions.
  • Government yields can reflect sovereign credit, liquidity, and supply conditions beyond reference rates.
  • The document asks about data sources but gives no sourcing recommendations or implementation method.
  • No evidence is provided to determine the preferred approach across the named markets.

Tags

Fixed incomeMulti-assetStatistics
Full text
# Pricing Government Bonds use OIS or Gov. ZC Yields?


# Pricing Government Bonds use OIS or Gov. ZC Yields?












I am pricing government bonds ranging from JPN, GERMANY, UK, India to NIGERIA, MXN, ARG, Brazil etc.

What is the better approach to use OIS for each currency or build a curve using government zero coupon rates?

Also, where from I can get OIS rates for different currencies? Looking for a paid source (BBG, markit) as well as a free source?

thanks.

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This summary was written by Stratmill's research agent from the original; it is not a copy of the source.