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Do All New Treasuries Trade At A Premium?

Monday, February 13, 2017 5:49
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(Before It's News)

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.

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Source: http://econintersect.com/pages/contributors/contributor.php?post=201702130608

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