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. 30-Year Treasury

    A U.S. Treasury debt obligation that has a maturity of 30 years. ...
  2. Treasury Direct

    The online market where investors can purchase federal government ...
  3. Thirty-Year Treasury

    A U.S. Treasury debt obligation that has a maturity of 30 years. ...
  4. United States Treasury Money Mutual ...

    An investment fund that pools money from investors to purchase ...
  5. 10-Year Treasury Note

    A debt obligation issued by the United States government that ...
  6. Treasury Bond - T-Bond

    A marketable, fixed-interest U.S. government debt security with ...
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. Financial Advisor

    Top 4 Treasurys ETFs (SHY, IEI)

    Learn about the specifics of the top four U.S. Treasury ETFs and how investors can buy ETFs that invest in bonds along the yield curve.
  3. Insights

    Why the 10-Year US Treasury Rates Are Crucial

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

    What's a 10-Year Treasury Note?

    A 10-year Treasury note is an intermediate debt obligation issued by the United States government, and with a ten-year maturity date.
  5. 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 ...
  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

    Buy Treasuries Directly From The Fed

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

    What is Treasury Stock?

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

    Interest Rates And Your Bond Investments

    By understanding the factors that influence interest rates, you can learn to anticipate their movement and profit from it.
  10. Investing

    The Treasury And The Federal Reserve

    Find out how these two agencies create policies to stimulate the economy in tough economic times.
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. Why are treasury bond yields important to investors of other securities?

    Learn about the wide-ranging impact of U.S. Treasury Bond yields on all other interest-bearing instruments in the economy ... Read Answer >>
  3. 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 >>
  4. How are treasury bills taxed?

    Read about how the Internal Revenue Service collects taxes on treasury bills purchased from the United States government ... Read Answer >>
  5. 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. Federal Direct Loan Program

    A program that provides low-interest loans to postsecondary students and their parents. The William D. Ford Federal Direct ...
  2. Cash Flow

    The net amount of cash and cash-equivalents moving into and out of a business. Positive cash flow indicates that a company's ...
  3. PLUS Loan

    A low-cost student loan offered to parents of students currently enrolled in post-secondary education. With a PLUS Loan, ...
  4. Graduate Record Examination - GRE

    A standardized exam used to measure one's aptitude for abstract thinking in the areas of analytical writing, mathematics ...
  5. Graduate Management Admission Test - GMAT

    A standardized test intended to measure a test taker's aptitude in mathematics and the English language. The GMAT is most ...
  6. Magna Cum Laude

    An academic level of distinction used by educational institutions to signify an academic degree which was received "with ...
Trading Center