What Is a Treasury Index?

A Treasury index is an index based on recent auctions of U.S. Treasury bills and is commonly used as a benchmark when determining interest rates, such as mortgage rates.

These indexes are constructed and published by various financial companies such as Vanguard, Fidelity, and Northern Trust, and may also form🅘 the basis of Treasury mutual funds issued by these providers.

Understanding Treasury Indexes

A Treasury index is based on the recent auctions of U.S. Treasury bills. Occasionally such an index is based on the U.S. Treasury's 澳洲幸运5开奖号码历史查询:daily yield curve. There are several treasury indices, but the most commonly used index is derived from the yields of 5- and 10-year Treasury notes and 澳洲幸运5开奖号码历史查询:futures contracts.

U.S. Treasury index rates influence other types of securities and are an important indicator of how much risk investors are willing to take on. Components of a treasury index are likely to be the 澳洲幸运5开奖号码历史查询:weighted average prices of five-year, 10-year, and bond-futures contracts. Since the elements have different investment time frames, each weighting is adj🦹usted for equal contribution to the index.

Lenders often use a treasury index to determine mortgage rates for mortgages with an unfixed component. A Treasury index is also us🍸ed as a performance benchmark for investors in the capital markets because it represents a rate of return that investors can get from almost any bank, with minimal effort. The calculations of Treasury indexes and their components vary by the financial institution calculating the index.

What Goes Into a Treasury Index

The various debt instruments sold by the U.S. Treasury come with different maturities of up to 30 years. 澳洲幸运5开奖号码历史查询:Treasury bills (T-bills) are short-term bonds that mature within a year, while the 澳洲幸运5开奖号码历史查询:Treasury notes (T-notes) have maturity dates of 10 years or less. The longest-term instruments are 澳洲幸运5开奖号码历史查询:Treasury bonds (T-bonds), which offer maturities of 20 and 30 years.

The U.S. government sells debt instruments such as Treasury bills, Treasury notes, and Treasury bonds through the U.S. Treasury to raise money for capital projects, such as improvements to infrastructure. Just like other bonds, Treasuries haveꦦ an inverse relationship between price and yield. An inverse correlation means that as the price rises, the yield will decrease. 

A Treasury index has a basis on the U.S. Treasury’s daily yield curve–the curve that shows the Treasury’s 澳洲幸运5开奖号码历史查询:return on investment (ROI) on the U.S. government’s debt obligations. The Treasury yield deꦇtermines the interest rate that the U.S. government can borrow money for various lengths of time. The Treasury yield also impacts how much investors can earn when they buy government securities. A Treasury index is also the source of the interest rates people and companies pay on loans from a financial institution.

The Treasury yield curve is an expression of how investors ꦰfeel about the economic environment. When yields are higher on long-term Treasuries, the economic outlook is positive. Interest 🍃rates increase when the Treasury yield rises because the government has to pay higher returns in order to draw investor interest.