Handling Treasury Auction Jumps in Fixed Income Time Series

Summary

The document discusses apparent jumps in US Treasury price and yield series around new auctions, especially when a rolling on-the-run bond is replaced. Whether to adjust the data depends on its intended use. For historical backtesting, preserving as-of data matters: removing observations with hindsight can distort what a strategy could have known at the time. For descriptive charts of on-the-run yields, the roll itself is a recognized feature, though settlement conventions for when-issued securities need care.

For relative-value analysis, a rolling series may need transformation to avoid treating changes in bond characteristics as market moves. One suggested approach is to construct constant-maturity par yields with a spline. Another response notes that coupon changes can explain discontinuities and that a repeatable correction process may be automated. The discussion offers contrasting use cases rather than a single cleaning rule; the appropriate treatment depends on whether the goal is faithful historical data, visualization, or comparable-maturity analysis.

Key ideas

• Keep as-of observations intact when historical data will be used for backtesting.
• On-the-run series can jump when a newly auctioned bond replaces the prior issue.
• Constant-maturity par yields built with a spline can support relative-value analysis.
• Coupon changes may contribute to apparent auction-related price discontinuities.

Tags

# How to take care of newly auctioned yield/price in fixed income data


# How to take care of newly auctioned yield/price in fixed income data












This is a financial data cleaning question. I have raw price and yield data for US cash treasury across the curve. In the time-series there are jumps on the day after the treasury auction results come out. Prior to using the data, is it good practice to manually remove the jumps? Thanks.

## Answer by Helin (score 1)

https://quant.stackexchange.com/a/26295

No, do nothing. It is important to have "as-of" data for backtesting.

Answer below is when I misread the question and thought you were trying to smooth out jumps in the rolling on-the-run series. I thought I'd keep it for reference purpose:

It depends on what you're doing. If this is purely to show where the rolling on-the-run bond yields have been trading, then no, do nothing. Practitioners are well aware of these "rolls." (Make sure your computational convention is correct – WIs should be computed using the US Treasury method for forward settlement on the issue date.)

If the time series is used for relative value trading, then these data need to be processed. The most common technique is to build a spline that generates constant maturity par yields.

## Answer by JoshK (score 0)

https://quant.stackexchange.com/a/26290

You need to have a process to fix the auction-day prices. Often the coupon is changed and you will have a previous price for the old coupon, which causes the jump. It happens fairly frequently; at my place we finally automated it.

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