Suppose you observe the following information related to Treasury yields. Each bond pays semi-annual coupon. Years 0.5 1 1.5 2 2.5 3.0 Coupon 0.00% 0.00 6.65 6.80 6.95 6.95 YTM 6.25% 6.45 6.65 6.85 7.05 7.25 Price 96.970 ? 100.000 99.908 99.774 99.204 Zero-coupon ? ? ? ? ?

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Treasury Market

On-the-run securities are the most recently issued securities in the market depth and are therefore traded at some premium. The off-the-run securities are the ones issued just before the most recent ones. The on-the-run securities have a lower yield to the investor than the off-the-run securities.