A Question on Treasury Yield Spreads

Iacobus

Newbie
Messages
1
Likes
0
Hi everyone,
Here goes my question: Consider a CMBS with a pass-through BEY of 5.58% and an average life of 11.4 years. I need to find the corresponding maturity Treasury to see its yield and calculate the spread with my CMBS.
I know that the average life of a Tresury equals its stated maturity so if I had a CMBS with an average life of 10 years, I would find the 10-year T-note (or bill or bond or whatever they call it). However, being 11.4, how do I find a Treasury of equal average life?
If someone could help, I'd really appreciate it. We're working on an assignment for a professor whose call to fame is making students miserable. He teaches like he's teaching PhD holders and we're not even finance majors.
Thanks a lot from the Big Apple.
 
Well, the simple answer is to find an old T-Bond that has the same time to maturity as your CMBS average life. That will give you a direct comparisson. Can't help but think maybe the prof is thinking "duration", though, rather than maturity.
 
the average duration of a zero coupon security is it's stated maturity; treasuries pay coupons, and so have a duration less than stated maturity.

So what you need to do is find a treasury with a duration equal to that of your CMBS to get the spread.
 
Top