New Issue Yield Spreads in the 30-Year Treasury Bond Market |
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| Authors: | Dennis J Lasser W Brian Barrett |
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| Institution: | SUNY-Binghamton, Binghamton, NY 13901.;University of Miami, Coral Gables, FL 33124-6552. This work was initiated while both authors were at the University of Miami and was supported in part by a University of Miami Corporate Affiliates grant. We would like to thank Louis Ederington, Robert Jennings, Howard Potter, and two anonymous referees for their helpful comments. |
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| Abstract: | This paper investigates the seasoning process of yield spreads between newly issued and seasoned 30-year Treasury bonds. These securities provide a unique data set for analyzing this relationship in that they allow for control of noncoupon differences between securities that were present in previous studies on corporate bonds. The results indicate that, in contrast to the existing literature, there appears to be a price premium for newly issued securities. We attribute this difference primarily to be a function of a higher degree of liquidity inherent to newly issued Treasury bonds. |
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