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

CC BY-SA 4.0
2023-09-18T14:03:56.290Z
2023-09-18T14:03:56.290Z
Jamie Smith
<p>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</p>
<blockquote>
<p>Yields on zero-coupon government bonds are spot rates.</p>
</blockquote>
<p>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
<a href="https://i.sstatic.net/lMq43.jpg" rel="nofollow noreferrer"><img src="https://i.sstatic.net/lMq43.jpg" alt="enter image description here" /></a></p>

CC BY-SA 4.0
2023-06-29T16:09:59.433Z
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](https://money.stackexchange.com/a/156572/109107).
AKdemy
<bonds>
Difference in spot rates and YTM for government bonds
Arvinth
# Difference in spot rates and YTM for government bonds

(Asked by: username_0 on 2023-06-29)

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](https://i.sstatic.net/lMq43.jpg)](https://i.sstatic.net/lMq43.jpg)

**Tags:** bonds
> **Comments:**
> **username_1**: 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](https://money.stackexchange.com/a/156572/109107).  

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## 1 answers

### Answer by username_2 on 2023-09-18. Score: 0

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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