A Treasury yield is the annual return you earn for lending money to the U.S. government by buying a Treasury security. It is expressed as a percentage of what you pay. If a Treasury yields 4%, you earn roughly $4 a year for every $100 invested, assuming you hold it as the yield calculation assumes.
Treasury yields matter far beyond people who own Treasuries. Because the U.S. government is considered a very reliable borrower, its yields serve as the baseline “risk-free” interest rates against which mortgages, corporate bonds, savings accounts and many other rates are compared.
Yield is not the same as the coupon
Treasury notes and bonds pay a fixed interest rate called the coupon, set when they are first sold. A 10-year note with a 4% coupon pays $40 a year per $1,000 of face value, split into two payments, for ten years.
After it is issued, the note trades in the market and its price changes. Its yield is the return a buyer gets at today’s price. If you pay less than face value, your yield is higher than the coupon because you also gain the difference when the note matures. If you pay more than face value, your yield is lower than the coupon.
Why prices and yields move in opposite directions
Imagine you own a note paying a 4% coupon, and new notes start being issued at 5%. Nobody will pay full price for your 4% note when they could get 5% elsewhere, so its price falls until its yield to a new buyer is competitive. The reverse happens when new rates fall: older notes with higher coupons become more valuable, and their prices rise. That is why a headline saying “Treasury yields rose” means Treasury prices fell.
Bills work a little differently
Treasury bills, which mature in a year or less, have no coupon. You buy them at a discount to face value and receive the full face value at maturity. Their yield comes entirely from that discount. Bill yields are quoted in two ways, the discount rate and the investment rate, which we explain in How Treasury Bill Yield Is Calculated.
What sets Treasury yields?
Treasury yields are set in the market by millions of trades. The main influences are:
- Federal Reserve policy, which anchors short-term rates.
- Inflation expectations, because investors want a return above inflation.
- Economic growth, which affects both expected rates and demand for safe assets.
- Supply and demand for Treasury securities, including how much the government borrows and who is buying.
- Risk appetite: in times of stress, investors often buy Treasuries for safety, pushing yields down.
The yields you see on this site
Each business day the U.S. Department of the Treasury publishes par yield curve rates: estimated yields for fixed maturities from 1 month to 30 years, based on closing market prices. A par yield is the coupon rate at which a new security of that maturity would sell for exactly its face value. These are the figures on our Treasury rates dashboard, each shown with its observation date.
Short-term vs. long-term yields
Yields differ by maturity. Plotting them from shortest to longest gives the yield curve. Long-term yields are usually higher than short-term yields, because investors generally want extra compensation for tying up money longer, but that is not always true. When short-term yields are higher, the curve is inverted.
A quick example
Suppose a 2-year note with a 4% coupon and $1,000 face value is trading at $990. You collect $80 of interest over two years plus a $10 gain at maturity, all on a $990 investment. Its yield is a little above 4.5% a year. If the same note were trading at $1,010, its yield would be a little below 3.5%. (These are illustrative numbers, not current market data.)
Key takeaways
- A Treasury yield is the annual return on a Treasury at its current price.
- Yields and prices move in opposite directions.
- Treasury yields are benchmarks for many other interest rates.
- Our site shows the Treasury’s official daily par yields with their dates, plus history back to 1990.