Par Yield Curve


DEFINITION of 'Par Yield Curve'

A graph of the yields on hypothetical Treasury securities with prices at par. On the par yield curve, the coupon rate will equal the yield-to-maturity of the security, which is why the Treasury bond will trade at par.

BREAKING DOWN 'Par Yield Curve'

Deriving a par yield curve is a step toward creating a theoretical spot rate yield curve, which is then used to more accurately price a coupon-paying bond. A method known as bootstrapping is used to derive the arbitrage-free forward interest rates.

  1. Off-The-Run Treasuries

    All Treasury bonds and notes issued before the most recently ...
  2. Yield Curve

    A line that plots the interest rates, at a set point in time, ...
  3. On-The-Run Treasuries

    The most recently issued U.S. Treasury bond or note of a particular ...
  4. On-The-Run Treasury Yield Curve

    The U.S. Treasury yield curve derived using on-the-run treasuries. ...
  5. Bootstrapping

    1. A procedure used to calculate the zero-coupon yield curve ...
  6. Maturity

    The period of time for which a financial instrument remains outstanding. ...
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