Working Paper

Using Treasury STRIPS to measure the yield curve

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.

Keywords: Interest rates; Government securities;

Bibliographic Information

Provider: Board of Governors of the Federal Reserve System (U.S.)

Part of Series: Finance and Economics Discussion Series

Publication Date: 2000

Number: 2000-42