This methodology is defined in Treasury Regulation § 20.2031–2 (b) (2), and is used when bonds trade on an exchange with only the “closing selling price” available, instead of the trade’s actual high/low.
But with EVP Office, when a bond trades, the actual high/low pricing is always available, and therefore the calculation method from Treasury Regulation § 20.2031–2 (b) (1) is used instead.
If a trade is not available on the actual evaluation date, the program searches for them “within a reasonable period” both forward and backward in time, to use in a weighted-mean calculation, also per § 20.2031–2 (b) (1).
If no trades are found, “bona fide bid and asked prices” are used, per Treasury Regulation § 20.2031–2 (c). If there are not bid and asks available on the evaluation date, the same search forward and backward in time is performed, and the same weighted-mean calculation is done, as with trades.
If, finally, no high/low or ask/bid data is available within a reasonable period, the EVP Office applications use “evaluated prices” provided by our primary data provider Intercontinental Exchange (ICE). “Evaluated prices are market-based measurements that are processed through a rules based pricing application and represent our good faith determination as to what the holder may receive in an orderly transaction … under current market conditions.” These do not meet the definition of a “closing selling price” as there was no sale, and so are not subject to § 20.2031–2 (b) (2).
In other words, EVP Office never uses § 20.2031–2 (b) (2) because it never uses “closing selling prices.”