Treasury Lock

AAA

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.

INVESTOPEDIA EXPLAINS '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. Lock Period

    A number of days, often 30 or 60, during which the interest rate ...
  2. Interest Rate

    The amount charged, expressed as a percentage of principal, by ...
  3. U.S. Treasury

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

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

    A marketable U.S. government debt security with a fixed interest ...
  6. Treasury Receipt

    A zero-coupon bond that doesn't pay interest at regular intervals ...
Related Articles
  1. Careers In The Derivatives Market
    Options & Futures

    Careers In The Derivatives Market

  2. Are Derivatives A Disaster Waiting To ...
    Options & Futures

    Are Derivatives A Disaster Waiting To ...

  3. Why Leveraged Investments Sink
    Options & Futures

    Why Leveraged Investments Sink

  4. Getting Acquainted With Options Trading
    Options & Futures

    Getting Acquainted With Options Trading

comments powered by Disqus
Hot Definitions
  1. Last In, First Out - LIFO

    An asset-management and valuation method that assumes that assets produced or acquired last are the ones that are used, sold ...
  2. Ghosting

    An illegal practice whereby two or more market makers collectively attempt to influence and change the price of a stock. ...
  3. Elasticity

    A measure of a variable's sensitivity to a change in another variable. In economics, elasticity refers the degree to which ...
  4. Tangible Common Equity - TCE

    A measure of a company's capital, which is used to evaluate a financial institution's ability to deal with potential losses. ...
  5. Yield To Maturity (YTM)

    The rate of return anticipated on a bond if held until the maturity date. YTM is considered a long-term bond yield expressed ...
  6. Net Present Value Of Growth Opportunities - NPVGO

    A calculation of the net present value of all future cash flows involved with an additional acquisition, or potential acquisition. ...
Trading Center