The Treasury rate refers to the current interest rate that investors earn on debt securities issued by the U.S. Treasury. The federal government borrows money by issuing U.S. Treasury bills, notes and bonds. The current Treasury rate is an important benchmark and indicator for investors and economists.
U.S. Treasury securities are considered to be the safest debt investment. The interest rate paid on Treasuries sets the benchmark as the zero risk rate due to the security of Treasury debt, and all other rates are compared to Treasury rates to indicate relative security or risk. Bonds of a certain credit rating will be evaluated on their spread above the comparable Treasury bond. For example, AA bonds might be 1 percent above the Treasury rate while single-A bonds could have a yield of 1.5 percent. Treasury rates also influence current mortgage rates.
Treasury debt is available in a range of maturities. Treasury bills are issued with maturities up to one year. Treasury notes have maturities of between two and 10 years, and Treasury bonds are issued with 30-year maturities. Treasury bills are sold at a discount, and investors earn interest by having the bills mature to their face value. Treasury notes and bonds pay interest every six months.
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There is a wide range of Treasury rates. Treasury securities have maturities ranging from 30 days to 30 years. If an investor is looking at a Treasury rate to compare to other investments, it is important to use the rate for the correct maturity. News commentary about the Treasury rate will include a specified maturity, such as the one-year Treasury rate or 10-year Treasury note rate.
Commonly referenced Treasury rates are the one-year, 10-year and 30-year rates. The one-year Treasury rate is the index rate for many adjustable rate mortgages (ARMs). The 10-year Treasury note is often used as a base rate for corporate bonds, and 30-year fixed mortgage rates are closely aligned with the 10-year Treasury rate. The 30-year bond rate is an indicator for long-term interest rates.
The graphic representation of the different Treasury rates based on maturity is called the yield curve. The yield curve shows Treasury rates for all maturities and the relationship between rate and maturity for Treasury debt securities. The U.S. Treasury has an online tool showing the current yield curve, available at USTreas.gov. The table provided by the Treasury shows the current Treasury rate for any maturity up to 30 years.
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