Treasury Yield


DEFINITION of '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.

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  1. Which economic factors impact treasury yields?

    The economic factors that impact Treasury yields are interest rates, inflation and economic growth. All of these factors ... Read Full Answer >>
  2. Why are treasury bond yields important to investors of other securities?

    The yields on U.S. Treasury instruments, notably 10-year Treasury bonds, are considered to be an important measuring stick ... Read Full Answer >>
  3. Where can I buy government bonds?

    The type of bond determines where you can purchase it, so you need to decide which type of bond you would like to purchase ... Read Full Answer >>
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    Though all mutual funds are considered liquid assets, only certain funds are considered cash equivalents. What Is a Cash ... Read Full Answer >>
  5. Are high yield bonds a good investment?

    Bonds are rated according to their risk of default by independent credit rating agencies such as Moody's, Standard & ... Read Full Answer >>
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