Is There an On-the-Run Premium in TIPS?

Jens Christensen, Jose Lopez and Patrick Shultz

No 2017-10, Working Paper Series from Federal Reserve Bank of San Francisco

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 identical maturities but of separate vintages are analyzed. Adjusting for differences in coupon rates and values of embedded deflation options, the results show a small, positive premium on recently issued TIPS - averaging between one and four basis points - that persists even after new similar TIPS are issued and hence is different from the on-the-run phenomenon observed in the nominal Treasury market.

JEL-codes: E43 E47 G12 G13 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2017-05-17
New Economics Papers: this item is included in nep-dcm
Note: This version: September 25, 2017.
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Citations: View citations in EconPapers (1)

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Journal Article: Is There an On-the-Run Premium in TIPS? (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedfwp:2017-10

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DOI: 10.24148/wp2017-10

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