Treasury Lock

DEFINITION of 'Treasury Lock'

A hedging tool used to manage interest-rate risk by effectively securing the current day's interest rates on federal government securities, to cover future expenses that will be financed by borrowing. Treasury locks are a type of customized derivative security that usually have a duration of one week to 12 months. They are cash settled, usually on a net basis, without the actual purchase of any Treasuries.

BREAKING DOWN 'Treasury Lock'

The parties involved in a Treasury lock, depending on the respective sides of the transaction, pay or receive the difference between the lock price and market interest rates. Treasury locks are commonly used by companies that plan to issue debt in the future, but want the security of knowing what interest rate they will pay on that debt.

RELATED TERMS
  1. Loan Lock

    The securing of a specified interest rate on a mortgage that ...
  2. Mortgage Rate Lock Deposit

    A fee that a lender charges a borrower that allows the borrower ...
  3. Mortgage Rate Lock

    An agreement between a borrower and a lender that allows the ...
  4. Locked Market

    A market in which a stock's bid and ask prices are identical. ...
  5. Lock Limit

    Commonly associated with the futures market, a lock limit occurs ...
  6. Mortgage Rate Lock Float Down

    A mortgage rate lock with the option to reduce the locked interest ...
Related Articles
  1. Personal Finance

    Got a Good Mortgage Rate? Lock It Up!

    Rising rates mean rising profits for lenders, providing incentive to increase rates whenever possible.
  2. Markets

    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 ...
  3. Markets

    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.
  4. Markets

    Buy Treasuries Directly From The Fed

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

    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.
  6. Investing

    What is Treasury Stock?

    Treasury stock is a company’s own stock that it holds in its treasury for later use.
  7. ETFs & Mutual Funds

    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.
  8. ETFs & Mutual Funds

    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.
  9. Markets

    What The National Debt Means To You

    The national debt is the net accumulation of the government’s annual budget deficits.
  10. Investing

    10 Ways to Profit From an Interest Rate Increase

    Discover 10 possible ways that individual investors and businesses can potentially profit from an environment of rising interest rates.
RELATED FAQS
  1. Will speculators buy or sell Treasury bond futures contracts if they expect interest ...

  2. 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 >>
  3. 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 >>
  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. 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 >>
  6. When are treasury bills best to use in a portfolio?

    Understand the role that U.S. Treasury bills can play in an investment portfolio and why they represent one of the most liquid ... Read Answer >>
Hot Definitions
  1. Diversification

    A risk management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique ...
  2. European Union - EU

    A group of European countries that participates in the world economy as one economic unit and operates under one official ...
  3. Sell-Off

    The rapid selling of securities, such as stocks, bonds and commodities. The increase in supply leads to a decline in the ...
  4. Brazil, Russia, India And China - BRIC

    An acronym for the economies of Brazil, Russia, India and China combined. It has been speculated that by 2050 these four ...
  5. Brexit

    The Brexit, an abbreviation of "British exit" that mirrors the term Grexit, refers to the possibility of Britain's withdrawal ...
  6. Underweight

    1. A situation where a portfolio does not hold a sufficient amount of a particular security when compared to the security's ...
Trading Center