A Seasoning Process in the U.S. Treasury Bond Market: The Curious Case of Newly Issued Ten-Year Notes

Peter Carayannopoulos

Financial Analysts Journal, 1996, vol. 52, issue 1, 48-55

Abstract: The pricing behavior of new Treasury notes and bonds issued during the Treasury's regular refunding operations suggest the existence of a seasoning process: Prices of new issues are generally higher than prices of equivalent seasoned issues. Although overpricing for issues with original maturities of 3, 5, and 30 years persists for approximately two to three months after issuance, the seasoning process for Treasury notes with original maturity of 10 years is more pronounced and lengthier. On average, the prices of these notes take approximately 20 months to adjust and become comparable to the prices of seasoned issues. To a lesser extent, this overpricing is present in the prices of the principal strips derived from the newly issued ten-year notes.

Date: 1996
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DOI: 10.2469/faj.v52.n1.1966

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