Affiliation:
1. Federal Reserve Bank of San Francisco, 101 Market Street MS 1130, San Francisco, CA 94105, USA
2. Wharton School of the University of Pennsylvania, 3620 Locust Walk, Philadelphia, PA 19104, USA
Abstract
In the U.S. Treasury market, the most recently issued, or so-called “on-the-run,” security typically trades at a price above those of more seasoned but otherwise comparable securities. This difference is known as the on-the-run premium. In this paper, yield spreads between pairs of Treasury Inflation-Protected Securities (TIPS) with both matching and nearly-matching maturities but of separate vintages are analyzed. Adjusting for differences in conventional liquidity premiums, values of embedded deflation options, and coupon rates, the results show a small, insignificant premium on recently issued TIPS, which leads us to conclude that there is no on-the-run premium in the TIPS market.
Publisher
World Scientific Pub Co Pte Lt
Subject
Strategy and Management,Economics and Econometrics,Finance
Cited by
4 articles.
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