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.

  1. Derivative

    A security with a price that is dependent upon or derived from ...
  2. Lock Period

    A number of days, often 30 or 60, during which the interest rate ...
  3. Treasury Bond - T-Bond

    A marketable, fixed-interest U.S. government debt security with ...
  4. U.S. Treasury

    Created in 1798, the United States Department of the Treasury ...
  5. Treasury Note

    A marketable U.S. government debt security with a fixed interest ...
  6. Interest Rate

    The amount charged, expressed as a percentage of principal, by ...
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