Keywords: Treasury STRIPS, Yield Curve, Treasury market
Abstract: Treasury STRIPS derived from coupon payments of notes and bonds provide
an effective reading of the zero-coupon yield curve. Among their
advantages, coupon STRIPS are zero-coupon securities, have a complete
range of maturities, and are fungible, which appears to make the coupon
STRIPS yield curve relatively smooth. Yields on coupon STRIPS are compared
to the zero-coupon yield curves derived from notes and bonds under the
Nelson-Siegel and the Fisher-Nychka-Zervos methods. The results point to
some shortcomings of these approaches and indicate that the zero-coupon
yield curve could be estimated more precisely from coupon STRIPS.
Full paper (863 KB PDF)
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Last update: October 26, 2000