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1Fix the driver behind crashes, sound loss and screen glitches2Repair Windows errors before they cause bigger problems3Scan for outdated or missing drivers - takes under a minuteFor a conventional fixed-rate Treasury note or bond, price and yield to maturity generally move in opposite directions: a higher market yield means a lower price, and a lower yield means a higher price. The coupon on an already-issued security does not change; its market price adjusts so its fixed payments can compete with current rates. To compare a quote, identify the Treasury type, then compare its price, fixed rate, yield measure, and remaining maturity.
Why Treasury prices and yields move in opposite directions
A fixed-rate Treasury promises specified interest payments and repayment of face value at maturity. If newly available investments offer higher rates, an older security with a lower fixed payment is less attractive at its former price. Its price generally falls until the payments and purchase price together offer a yield competitive with the market. If market yields fall, the older security’s fixed payments become more attractive, so its price generally rises.
The SEC Office of Investor Education and Advocacy put it plainly in its June 26, 2013 Investor Bulletin: “market interest rates and bond prices move in opposite directions—for example, when market interest rates go up, prices of fixed-rate bonds fall.” The relationship is general rather than a guarantee that every quoted Treasury price will move by the same amount.
Coupon rate, yield to maturity, and price are different
Interest rate or coupon
For a Treasury note or bond, the stated interest rate applies to its face value. Notes and bonds pay that interest every six months. The rate is set when the security is issued and does not change when it trades in the secondary market. TreasuryDirect’s Treasury Notes page explains their fixed semiannual payments and that investors may hold notes to maturity or sell them earlier.
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Yield to maturity
Yield to maturity is a return measure associated with the security’s price and payment stream, assuming the relevant payments and repayment occur as specified. It is not the coupon rate. For an existing fixed-rate note or bond, a lower market price generally corresponds to a higher yield to maturity; a higher price generally corresponds to a lower yield.
Price relative to par
Par is the security’s face value. TreasuryDirect’s Understanding Pricing and Interest Rates gives the comparison rule for notes and bonds:
- If yield to maturity is higher than the stated interest rate, price is below par.
- If yield to maturity equals the stated interest rate, price is at par.
- If yield to maturity is lower than the stated interest rate, price is above par.
This describes the relationship between price, stated rate, and yield; it does not mean that a below-par security has a changed coupon.
How to compare a Treasury quote
- Identify the security type. Check whether the quote is for a bill, note, bond, Treasury Inflation-Protected Security (TIPS), or Floating Rate Note (FRN). Their payment structures differ; Treasury lists these as its five marketable security types on its About Treasury Marketable Securities page.
- For a fixed-rate note or bond, compare stated interest rate with yield to maturity. Yield above the stated rate corresponds to a below-par price; yield below it corresponds to an above-par price.
- Compare similar remaining maturities and coupons. A price response to a rate change is not identical across securities. The SEC notes that maturity and coupon affect how much a bond’s price changes when market rates move. In general, longer maturity and lower coupon mean greater sensitivity to rate changes.
- Check the quote date and source. A market quote is time-specific, not a current value simply because it appears on a page. Treasury securities may be bought at auction or in the secondary market, as described in TreasuryDirect’s FAQs about Treasury Marketable Securities.
- Review the full transaction details before trading. A displayed price may not by itself describe every amount involved in a particular secondary-market transaction. Use the broker’s complete quote and settlement details; the price/yield relationship alone does not establish the final amount you will pay.
SEC examples: how the same fixed coupon can trade at different prices
The SEC’s 2013 bulletin offers an illustration, not a current quote or forecast. It describes a 10-year Treasury with a 3% coupon priced at $1,000 when market rates and yield are 3%. After one year, with nine years remaining, its example price is $1,082 when market rates and yield are 2%. In the reverse case, market rates rise from 3% to 4%; with nine years remaining, the example price falls to $925 as yield rises to 4%. The coupon remains 3% in both later examples; the price changes.
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TreasuryDirect’s pricing page also includes auction illustrations: a 20-year bond with a 1.850% high yield, 1.750% interest rate, and 98.336995 price, and a 7-year note with a 1.461% high yield, 1.375% interest rate, and 99.429922 price. In each illustration the yield exceeds the stated rate and the price is below par. TreasuryDirect’s captured page text does not date these examples, so they should not be read as current yields or prices.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.How Treasury types differ from the simple fixed-coupon example
Bills
Treasury bills mature in one year or less and are sold at face value or at a discount; the discount relative to face value represents interest. They do not follow the same fixed semiannual coupon description used for notes and bonds. See TreasuryDirect’s pricing explanation.
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Notes and bonds
Treasury notes are issued with 2-, 3-, 5-, 7-, or 10-year terms and pay fixed interest every six months. Notes and bonds can be held to maturity or sold earlier. For conventional fixed-rate notes and bonds, the inverse price/yield explanation applies directly, while maturity and coupon help determine sensitivity to rate changes.
TIPS
TIPS have a fixed interest rate, but their principal adjusts with inflation and deflation. Because interest is calculated on adjusted principal, the dollar interest payment can change as principal changes. The fixed-coupon example is therefore not a complete description of TIPS cash flows. TreasuryDirect describes this structure in its TIPS information and pricing explanation.
Floating Rate Notes
FRNs have an index rate tied to the highest accepted discount rate of the most recent 13-week Treasury bill, plus a spread set at auction. Treasury resets the index weekly. Since the rate floats rather than staying fixed for the life of the security, do not treat an FRN as if it had the same fixed-coupon payment stream as a conventional note or bond. TreasuryDirect’s Floating Rate Notes page describes the index and reset.
Quick Recap
What to remember when reading a yield and price together
- A note or bond’s stated interest rate determines its fixed interest payments; yield to maturity reflects its price and payment stream.
- For fixed-rate notes and bonds, rising market yields generally mean falling prices, while falling yields generally mean rising prices.
- Relative to par, yield above the stated rate corresponds to a discount; yield below it corresponds to a premium.
- Instrument type, remaining maturity, coupon, quote date, and transaction details all matter when comparing actual securities.
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