Abstract
This article examines whether or not a benchmark issue premium has existed in the Japanese government bond market. If the premium exists, a benchmark issue is less discounted than a non-benchmark issue, which only differ in their coupon rates. We show that, if the benchmark issue premium does not exist, then their prices are cointegrated, with cointegrating vector (1,− c), where c denotes the ratio of their coupon rates. Examining this condition, we find that, while a benchmark issue premium may have existed in past, it disappears recent periods.
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