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Do All New Treasuries Trade at a Premium?

Author

Listed:
  • Jens H. E. Christensen
  • Jose A. Lopez
  • Patrick Shultz

Abstract

In the Treasury market, the most recently issued security typically trades at a higher price than more seasoned but otherwise comparable securities. The difference is known as the ?on-the-run? premium. This phenomenon opens the question of whether a similar premium exists for all Treasury bonds. Examining yield spreads between pairs of inflation-protected securities, known as TIPS, that have identical maturities but different issue dates suggests that this is not the case: There is no on-the-run premium in the TIPS market at this time.

Suggested Citation

  • Jens H. E. Christensen & Jose A. Lopez & Patrick Shultz, 2017. "Do All New Treasuries Trade at a Premium?," FRBSF Economic Letter, Federal Reserve Bank of San Francisco.
    • Handle: RePEc:fip:fedfel:00118
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    File URL: http://www.frbsf.org/economic-research/files/el2017-03.pdf
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    References listed on IDEAS

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    1. Jens H. E. Christensen & Jose A. Lopez & Glenn D. Rudebusch, 2016. "Pricing Deflation Risk with US Treasury Yields," Review of Finance, European Finance Association, vol. 20(3), pages 1107-1152.
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    Cited by:

    1. Fabienne Schneider, 2024. "On-the-run Premia, Settlement Fails, and Central Bank Access," Working Papers 24.05, Swiss National Bank, Study Center Gerzensee.
    2. Iñaki Aldasoro & Peter Hördahl & Sonya Zhu, 2022. "Under pressure: market conditions and stress," BIS Quarterly Review, Bank for International Settlements, September.

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