This page explains pricing and interest rates for the five different Treasury marketable securities.
For information on recent auctions, see Results of recent auctions
Bills
Bills are short-term securities that mature in one year or less. They are sold at face value (also called par value) or at a discount. When they mature, we pay you the face value.
The difference between the face value and the discounted price you pay is "interest."
To see what the purchase price will be for a particular discount rate, use the formula:
Price = Face value (1 – (discount rate x time)/360)
Example:
A $1,000 26-week bill sells at auction for a discount rate of 0.145%.
Price = 1000 (1 – (.00145 x 182)/360) = $999.27
The formula shows that the bill sells for $999.27, giving you a discount of $0.73. When you get $1,000 after 26 weeks, you have earned $0.73 in "interest."
Bonds and Notes
Bonds are long-term securities that mature in 20 or 30 years.
Notes are relatively short or medium-term securities that mature in 2, 3, 5, 7, or 10 years.
Both bonds and notes pay interest every six months. The interest rate for a particular security is set at the auction.
The price for a bond or a note may be the face value (also called par value) or may be more or less than the face value. The price depends on the yield to maturity and the interest rate.
If the yield to maturity is
the price of the bond or note will be
greater than the interest rate
less than par value
equal to the interest rate
par value
less than the interest rate
more than par value
The "yield to maturity" is the annual rate of return on the security.
Here are examples from recent auctions:
Type of security
Time to maturity
High yield at auction
Interest rate set at auction
Price
Bond
20 year
1.850%
1.750%
98.336995
Note
7 year
1.461%
1.375%
99.429922
In both examples, the yield is higher than the interest rate. Therefore, the price was lower than par value.
During the life of the bond or note, you earn interest at the set rate on the par value of the bond or note. The interest rate set at auction will never be less than 0.125%.
If you still own the bond after 20 years or the note after seven years, you get back the face value of the security. That means you will have also earned $1.66 for every $100 par value of your bond and $0.57 for every $100 par value of your note.
TIPS
Treasury Inflation-Protected Securities (TIPS) are available both as medium and long-term securities. They mature in 5, 10, or 30 years.
Like bonds and notes, the price and interest rate are determined at the auction.
The interesting aspect of TIPS, that differs from bonds and notes, is that the principal goes up and down with inflation and deflation. While the interest rate is fixed, the amount of interest you get every six months may vary due to any change in the principal.
To calculate the inflation-adjusted interest you will get, near the time your interest payment is due, follow these steps:
Locate your TIPS on the TIPS Inflation Index Ratios page.
Follow the link and locate the Index Ratio that corresponds to the interest payment date for your security.
Multiply your original principal amount by the Index Ratio. (this is your inflation-adjusted principal).
Now, multiply your inflation-adjusted principal by half the stated interest (coupon) rate on your security.
The resulting number is your semi-annual interest payment.
Example:
You have $1,000 invested in a 5-year TIPS with an interest rate of 0.125%. You will get an interest payment next week and want to know how much it will be.
When you look up the Index Ratio for your TIPS, you see it is 1.01165. Multiplying your $1,000 by 1.01165, you get your adjusted principal: $1,011.65.
For this six-month payment, you get half of 0.125% (your annual interest rate), which is 0.0625%.
Turn the percent into a decimal by moving the decimal point two places to the left: 0.000625.
Now, multiply the adjusted principal by the half-year interest rate: In this example, multiplying $1,011.65 times 0.000625 gives you your expected interest payment: $0.63.
Floating Rate Notes (FRNs)
FRNs are relatively short-term investments that mature in two years.
The price of an FRN is determined at auction. The price may be greater than, less than, or equal to the FRN's par amount.
The interest rate of an FRN changes, or “floats,” over the life of the FRN.
The interest rate is the sum of two parts: an index rate and a spread.
Index rate - The index rate of your FRN is tied to the highest accepted discount rate of the most recent 13-week Treasury bill. We auction the 13-week bill every week, so the index rate of an FRN is reset every week. You can see the daily index for current FRNs.
Spread - The spread is a rate we apply to the index rate. The spread stays the same for the life of an FRN. The spread is determined at auction when the FRN is first offered. The spread is the highest accepted discount margin in that auction.
The spread plus the index rate equals the interest rate.
We apply the interest rate to an FRN's par amount daily. The aggregate interest earned to date on an FRN accumulates every day.
Bond prices move in inverse fashion to interest rates, reflecting an important bond investing consideration known as interest rate risk. If bond yields decline, the value of bonds already on the market move higher.If bond yields rise, existing bonds lose value.
Treasury bill quotes are provided in yield form, reflective of the rate of return the bill provides. For example, a Treasury bill quote might look like 3.2%. Instead of providing an actual price, the investor knows that they will achieve an overall return (yield) of 3.2% based on the discount of the bond.
What Type of Interest Payments Are Earned on a Treasury Bill? The only interest paid will be when the bill matures. At that time, you are given the full face value. T-bills are zero-coupon bonds usually sold at a discount, and the difference between the purchase price and the par amount is your accrued interest.
Most bonds pay a fixed interest rate that becomes more attractive if interest rates fall, driving up demand and the price of the bond. Conversely, if interest rates rise, investors will no longer prefer the lower fixed interest rate paid by a bond, resulting in a decline in its price.
Most bonds and interest rates have an inverse relationship. When rates go up, bond prices typically go down, and when interest rates decline, bond prices typically rise.
Treasury bills, or bills, are typically issued at a discount from the par amount (also called face value). For example, if you buy a $1,000 bill at a price per $100 of $99.986111, then you would pay $999.86 ($1,000 x . 99986111 = $999.86111). * When the bill matures, you would be paid its face value, $1,000.
Basic Info. 3 Month Treasury Rate is at 5.45%, compared to 5.46% the previous market day and 5.26% last year. This is higher than the long term average of 2.71%. The 3 Month Treasury Rate is the yield received for investing in a US government issued treasury security that has a maturity of 3 months.
A Treasury bond, or "T-bond," is a debt issued by the U.S. government to raise money. When you buy a T-bond, you lend the federal government money, and it pays you a stated rate of interest until the loan comes due.
T-bills have a key advantage over CDs: They're exempt from state income taxes. The same is true with Treasury notes and Treasury bonds. If you live in a state with income taxes, and rates are similar for CDs and T-bills, then it makes sense to go with a T-bill.
For example, suppose an investor purchases a 52-week T-bill with a face value of $1,000. The investor paid $975 upfront. The discount spread is $25. After the investor receives the $1,000 at the end of the 52 weeks, the interest rate earned is 2.56% (25 / 975 = 0.0256).
You can hold Treasury bills until they mature or sell them before they mature. To sell a bill you hold in TreasuryDirect or Legacy TreasuryDirect, first transfer the bill to a bank, broker, or dealer, then ask the bank, broker, or dealer to sell the bill for you.
The interest rate on a Series I savings bond changes every 6 months, based on inflation. The rate can go up. The rate can go down. The overall rate is calculated from a fixed rate and an inflation rate.
There's actually a limit on how much you can invest in I-bonds per year. The annual maximum in purchases is $10,000 worth of electronic I-bonds, although in some cases, you may be able to purchase an additional $5,000 worth of paper I-bonds using your tax refund.
§ 359.16 When does interest accrue on Series I savings bonds? (a) Interest, if any, accrues on the first day of each month; that is, we add the interest earned on a bond during any given month to its value at the beginning of the following month.
Inflation. When inflationary pressures emerge, Treasury yields move higher as fixed-income products become less desirable. Additionally, inflationary pressures typically force central banks to raise interest rates to shrink the money supply.
Bond yields have shot higher since March 2022, when the Federal Reserve began raising interest rates. The 10-year Treasury yield has soared to 4.67% Friday (April 26) from 1.72% Feb. 27, 2022. It even hit a 16-year high of 5% last October.
The 3-Month Treasury bill is a short-term U.S. government security with a constant maturity period of 3 months. The Federal Reserve calculates yields for "constant maturities" by interpolating points along a treasury curve comprised of actively traded issues of term (e.g., 1 month) maturities.
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