I'm preparing for CFA L1. I assumed that 3 year spot rate of treasury to be equal to the YTM of 3 year treasury bond. The Schweser notes define spot rate as below

Yields on zero-coupon government bonds are spot rates.

However in the below example from the Schweser notes, there's difference between 3 year spot rate and YTM of 3 year treasury bond. I'm trying to understand why. Thanks in advance enter image description here

  • $\begingroup$ Any bond that trades of par, will have a YTM different from spot (which is essentially every single bond). 3 year Treasuries also pay coupons and are not zero coupon. You can see a bunch of actual quotes for treasuries in this answer. $\endgroup$
    – AKdemy
    Jun 29, 2023 at 16:09

1 Answer 1


Spot rates for x-years in the future represent the difference (as a %) between the face-value of a bond and the purchase price.

I.e. If you buy a 2-year zero-coupon bond with a face value of £105 for £100, the spot rate would be 5%.

Yield To Maturity (YTM), however, refers only to coupon interest rates paid on bonds on an semi-annual basis. It doesn't account for any return on capital invested in the bond (if you buy it for less than the face-value).


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