A seasoning process in the U.S. treasury bond market: The curious case of newly issued ten-year notes

Financial Analysts Journal

Volumn 52, Issue 1, 1996, Pages 48-55

  Carayannopoulos, Peter ^a  

^a UNIVERSITY OF MICHIGAN FLINT   (United States)

Author keywords

[No Author keywords available]

Indexed keywords

EID: 0038978243     PISSN: 0015198X     EISSN: None     Source Type: Journal    
DOI: 10.2469/faj.v52.n1.1966     Document Type: Article

References (16)

1. "On the run" refers to the most recently issued Treasury securities.
2. See Y. Amihud and H. Mendelson, "Asset Pricing and the Bid-Ask Spread," Journal of Financial Economics, vol. 17, no. 2 (December 1986):223-49.
3. See Y. Amihud and H. Mendelson, "Liquidity, Maturity, and the Yields on U.S. Treasury Securities," The Journal of Finance, vol. 46, no. 4 (September 1991):1411-26.
4. For more information on the U.S. Treasury's refunding operations, see F.J. Fabozzi, Bond Markets, Analysis and Strategies, 2nd ed. (Englewood Cliffs, NJ: Prentice Hall, 1993).
5. Some pricing differences between coupon and principal strips of the same maturity exist. For a discussion of these differences, see P.R. Daves and M.C. Ehrhardt, "Liquidity, Reconstitution, and the Value of U.S. Treasury Strips," The Journal of Finance, vol. 48, no. 1 (March 1993):315-30.
6. Results throughout this study assume a face value of $100 for each Treasury security that is being replicated.
7. A level of significance of 0.025 is used for all comparisons throughout this study.
8. See Y. Amihud and H. Mendelson, "Asset Pricing and the Bid-Ask Spread "; and O. Sarig and A. Warga, "Bond Market Liquidity," Journal of Financial and Quantitative Analysis, vol. 24, no. 3 (September 1989):367-78.
9. See Y. Amihud and H. Mendelson, "Asset Pricing and the Bid-Ask Spread "; and O. Sarig and A. Warga, "Bond Market Liquidity," Journal of Financial and Quantitative Analysis, vol. 24, no. 3 (September 1989):367-78.
10. See Sang and Warga, "Bond Market Liquidity."
11. See W.D. Gregory and M. Livingston, "Development of the Market for U.S. Treasury STRIPS," Financial Analysts Journal, vol. 48, no. 2 (March/April 1992):68-74; and B.D. Jordan, S.D. Jordan, and R.D. Jorgensen, "Option Prices Implicit in Callable Treasury Bonds: A Reexamination of the Callable U.S. Treasury Bond Puzzle," Journal of Financial Economics, vol. 38, no. 2 (June 1995):141-62.
12. See W.D. Gregory and M. Livingston, "Development of the Market for U.S. Treasury STRIPS," Financial Analysts Journal, vol. 48, no. 2 (March/April 1992):68-74; and B.D. Jordan, S.D. Jordan, and R.D. Jorgensen, "Option Prices Implicit in Callable Treasury Bonds: A Reexamination of the Callable U.S. Treasury Bond Puzzle," Journal of Financial Economics, vol. 38, no. 2 (June 1995):141-62.
13. See B. Cornell and A.C. Shapiro, "The Mispricing of U.S. Treasury Bonds: A Case Study," The Review of Financial Studies, vol. 2, no. 3 (Fall 1989):315-30.
14. See P.R. Daves and M.C. Ehrhardt, "Liquidity, Reconstitution, and the Value of U.S. Treasury Strips."
15. An analysis based on ask prices provides almost identical results.
16. This study was supported by grants from the Faculty Development and the Faculty Initiative Programs of the University of Michigan-Flint.