from the San Francisco Fed
– this post authored by Jens H.E. Christensen, Jose A. Lopez, and Patrick Shultz
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.