Loading the player...

What is the 'Treasury Yield'

The return on investment, expressed as a percentage, on the U.S. government's debt obligations (bonds, notes and bills). Looked at another way, the Treasury yield is the interest rate the U.S. government pays to borrow money for different lengths of time. Treasury yields don't just influence how much the government pays to borrow and how much investors earn by investing in this debt, however; they also influence the interest rates individuals and businesses pay to borrow money to buy real estate, vehicles and equipment. Treasury yields also tell us how investors feel about the economy. The higher the yields on 10-, 20- and 30-year Treasuries, the better the economic outlook.

BREAKING DOWN 'Treasury Yield'

Treasuries are considered to be a low-risk investment because they are backed by the full faith and credit of the U.S. government, which includes the government's authority to raise taxes to cover its obligations. Because of their low risk, Treasuries have a low return compared to many other investments. Especially low Treasury yields like the ones seen from 2009 through 2013 can drive investors into riskier investments, such as stocks, where they can earn a higher return.

The different types of U.S. Treasuries include Treasury notes, Treasury bills and Treasury bonds, which come in different maturities up to 30 years. There are one-month, three-month, six-month, one-year, two-year, three-year, five-year, seven-year, 10-year, 20-year and 30-year securities. Each has a different yield, and the U.S. Treasury publishes the yields for all of these securities daily on its website. Under normal circumstances, longer-term Treasury securities have a higher yield than shorter-term Treasury securities. For example, the yield on a one-month security might be 0.06%, while the yield on a three-year security is 0.79% and the yield on a 30-year security is 3.70%.

Treasury yields can go up if the Federal Reserve increases its target for the federal funds rate (in other words, if it tightens monetary policy), or even if investors merely expect the fed funds rate to go up. When demand for Treasury bonds decreases, Treasury yields increase; when demand increases; Treasury yields decrease.

RELATED TERMS
  1. Thirty-Year Treasury

    A U.S. Treasury debt obligation that has a maturity of 30 years. ...
  2. 10-Year Treasury Note

    A debt obligation issued by the United States government that ...
  3. Treasury General Account

    The general checking account used by the Department of the Treasury. ...
  4. U.S. Treasury

    Created in 1798, the United States Department of the Treasury ...
  5. Treasury Bond - T-Bond

    A marketable, fixed-interest U.S. government debt security with ...
  6. Constant Maturity

    An adjustment for equivalent maturity, used by the Federal Reserve ...
Related Articles
  1. Investing

    Understanding Treasury Yield

    Treasury yield refers to the return on an investment in a U.S. government debt obligation, such as a bill, note or bond.
  2. Insights

    Why the 10-Year U.S. Treasury Yield Matters

    10-year treasury bond yields are important indicators of the economy as a whole.
  3. Investing

    What is Treasury Stock?

    Treasury stock is a company’s own stock that it holds in its treasury for later use.
  4. Investing

    Introduction to Treasury Securities

    Purchasing bonds that are backed by the full faith and credit of the U.S. government can provide steady guaranteed income and peace of mind. Knowing the characteristics of each type of treasury ...
  5. Investing

    Buy Treasuries Directly From The Fed

    If you want government securities, go straight to the source. We'll show you how.
  6. Insights

    Understanding The Treasury Yield Curve Rates

    Treasury yield curves are a leading indicator for the future state of the economy and interest rates.
  7. Investing

    The Brexit Effect on U.S. Mortgage Rates

    The Brexit vote is expected to create a continuing investor rush to buy U.S. Treasuries as a safe-haven, resulting in lower mortgage rates for borrowers in the U.S.
  8. Investing

    TLT: iShares Barclays 20+ Year Treasury Bond ETF

    Learn about the iShares 20+ Year Treasury Bond ETF (TLT). TLT is a very liquid ETF with low costs that allow investors to gain exposure to treasuries.
  9. Investing

    How Often the 10-Year Yield Underperforms the S&P 500

    Learn why the S&P 500 Index dividend yield exceeds the yield on 10-year U.S. Treasurys for only the third time in history and why this trend might end soon.
RELATED FAQS
  1. Which economic factors impact treasury yields?

    Discover the economic factors that impact Treasury yields. Treasury yields are the benchmark yield for the rest of the world, ... Read Answer >>
  2. What is the difference between the Daily Treasury Long-Term Rates and the Daily Treasury ...

    Find out more about the daily Treasury long-term rates, daily Treasury yield curve rates and the difference between these ... Read Answer >>
  3. What are the maturity terms for Treasury bonds?

    Learn how treasury bonds pay interest, when they reach maturity and the differences between terms for treasury bonds and ... Read Answer >>
  4. How is the interest rate on a treasury bond determined?

    Explore the difference between interest rates and bond coupons, what determines current yield on debt instruments, and why ... Read Answer >>
Hot Definitions
  1. Notional Value

    The total value of a leveraged position's assets. This term is commonly used in the options, futures and currency markets ...
  2. Interest Expense

    The cost incurred by an entity for borrowed funds. Interest expense is a non-operating expense shown on the income statement. ...
  3. Call Option

    An agreement that gives an investor the right (but not the obligation) to buy a stock, bond, commodity, or other instrument ...
  4. Pro-Rata

    Used to describe a proportionate allocation. A method of assigning an amount to a fraction, according to its share of the ...
  5. Private Placement

    The sale of securities to a relatively small number of select investors as a way of raising capital.
  6. AAA

    The highest possible rating assigned to the bonds of an issuer by credit rating agencies. An issuer that is rated AAA has ...
Trading Center