We are independent & ad-supported. We may earn a commission for purchases made through our links.
Advertiser Disclosure
Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.
How We Make Money
We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently of our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.
Finance

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

What are Treasury Bond Rates?

By Theresa Miles
Updated: May 17, 2024
Views: 5,028
References
Share

Treasury bond rates are the interest rates that the U.S. Treasury Department (Treasury) pays on securities issued to bondholders for the use of their money. The Treasury issues bills, notes, and bonds, but the public typically refers to all three Treasury securities collectively as “Treasury bonds". Interest rates for bonds are set at weekly Treasury auctions, and are determined by the price large financial institutions are willing to pay for the bonds through competitive bidding.

The U.S. sells bonds to the public to finance the operation of the government. Treasury bonds can be purchased by individuals as well as foreign or domestic entities. Many foreign governments use their national budget surpluses to buy Treasury bonds as an investment. The U.S. national debt is, in fact, the total amount that the government owes to outstanding bondholders, plus the money the government must reimburse certain national accounts, such as Social Security, from which the government has borrowed funds.

A bond is a loan of money in exchange for a guaranteed stream of interest payment over the course of the loan term and the return of the principal amount of the loan on the loan’s due date. Treasury bills, notes, and bonds differ in the length of time it takes for the loan made under each to become due. Bonds are considered one of the safest investment vehicles because the interest and repayment are backed by the full faith and credit of the U.S. government, an entity considered highly unlikely to default on its obligations. Treasury bond rates, reflective of one of the safest possible investments, benchmark the interest rates of other debt securities.

The Treasury sets a face, or par, value and an interest rate for bonds and sells them to financial institutions at auction. These financial institutions determine how much they are willing to pay for the bonds based on their estimation of the present value of the future payments of interest and principal guaranteed by the government, taking into account inflation and the possibility that interest rates will go up or down in the future. The final price paid by the highest bidder for the bond will either be less or more than the face value, reflecting if the bond was purchased at a discount or at a premium.

Treasury bond rates and yields on bonds are the baseline factors for setting interest rates domestically, and are also very influential in setting international interest rates. In the U.S., all other types of bonds and debt securities benchmark their interest rates based on Treasury bond rates. Any debt security or bond offered by a corporation or other private entity that is considered a higher risk than government-issued Treasury bonds must offer a higher interest rate or yield than comparably termed Treasury securities.

Share
WiseGeek is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Link to Sources

Editors' Picks

Discussion Comments
Share
https://www.wisegeek.net/what-are-treasury-bond-rates.htm
Copy this link
WiseGeek, in your inbox

Our latest articles, guides, and more, delivered daily.

WiseGeek, in your inbox

Our latest articles, guides, and more, delivered daily.