Actual | Previous | |
---|---|---|
Total Amount | $13 B | $13 B |
Coupon Rate | 4.750% | 4.750% |
Bid/Cover | 2.53 | 2.55 |
Yield Awarded | 4.423% | 4.213% |
CUSIP Number | 912810TW8 | 912810TW8 |
Originally Announced CUSIP | 912810TW8 | 912810TW8 |
Definition
Description
Interest rates on Treasury securities are determined in the market; the Federal Reserve does not set them. However, bond investors are sensitive to Federal Reserve policy and thus market rates will mirror policy expectations. Usually, bond market players are forward-looking and this means that interest rates on Treasury securities will move in the direction of Fed policy with a lead. As a result, one is more likely to see rising interest rates on Treasury yields during an expansion (and falling yields during economic slowdowns) in advance of policy changes by the Federal Reserve.
Primer on Treasuries
Treasury securities, Treasuries, U.S. government bonds, T-bonds, T-notes, and T-bills all refer to the same type of security: debt obligations of the United States. Maturity refers to the length of the loan to the government. Treasury notes have maturities from 2 to 10 years (2-, 3-, 5-, 7- and 10-year notes are most common) while Treasury bonds have maturities longer than 10 years (commonly 30-year, and 20-year since May 2020). Since 2008, the Treasury ruled that all securities it issues now have minimum denominations of $100 and must be purchased in increments of $100.
How bonds work
You pay $1,000 for a bond. You receive interest payments every six months based on the coupon rate. If the rate is 6%, you get $30 every six months for a total of $60/year. When the bond matures in twenty years, you get back the original investment of $1,000, called the principal.
Investment Profile
Treasuries offer a measure of security unmatched by other investments - the U.S. government guarantees the initial investment (the principal) and interest payments. When Treasuries are resold in the secondary market, their prices are often significantly different than their face value since prices in the secondary market fluctuate based on the economic environment, inflation expectations, Federal Reserve policy, and simple forces of supply and demand. If a Treasury security is held to maturity, inflation and opportunity risks remain. Inflation erodes the value of both the principal and interest payments. Opportunity risk refers to what could have been earned had the money been invested elsewhere.
Frequency
Varies according to funding needs