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YTM (Yield To Maturity) on US Treasury STRIPS
What is YTM (Yield To Maturity) of US Treasury STRIPS?
✍: FYIcenter.com
Yield on US Treasury STRIPS (T-STRIPS) refers
to the equivalent compounding interest rate for all revenues
generated during the entire investment term.
YTM (Yield To Maturity) refers to the yield of a T-STRIPS,
if you hold it until its maturity date.
Since there is no coupon payments on T-STRIPS, we can use the same present value expression without the coupon components:
Note that even there is no coupon payments on T-STRIPS, we still use the coupon payment period of 6 months as the interest compounding period in the same way as the original T-Note/T-Bond. See "Performance Measurements of US Treasury Note/Bond" tutorials on YTM calculation for T-Note/T-Bond.
Without coupon payments, the present value expression can be inversed to give the YTM expression:
Here is an example of 30-year T-STRIPS available on Fidelity Investments to trade. It shows a list of bidding and asking quotes with prices and YTMs as of Friday, 2025-06-20. The first bidding quote indicates:
CUSIP: 912834PB8 Description: U S TREAS SEC STRIPPED INT PMT 0.00000% 11/15/2044ZERO CPN Maturity: 11/15/2044 Price: $36.839 (for $100.00 par value) Yield: 5.216% (YTM - Yield To Maturity) Settlement Date: 2025-06-23 (Next business day)
We can use this example to verify the YTM (Yield To Maturity) definition:
The output matches well with the bidding quote displayed on Fidelity Investments:
PV = 36.839 (Price as Present Value)
YTM = 0.05216 (Yield as YTM - Yield To Maturity)
Par = 100.0 (Par value is an assumption)
n = 20 (There are 20 coupon periods left)
Days = 145 ("2025-11-15" - "2025-06-23")
Period = 184 ("2025-11-15" - "2025-05-15")
f = 1 - Days/Period = 1 - 145/184 = 0.7880 (first period fraction)
You can also use our YTM calculator to validate the result. Click this link "T-STRIPS 912834PB8 settled on 2025-06-23 with a price of $36.839", you will see the purchase price of 5.2159% displayed.
Related topics:
⇒ Imputed Interest of US Treasury STRIPS
⇐ Buy Treasury Bills with Fidelity Investments
2025-06-22, ∼523🔥, 0💬
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