US Treasury bond quotes, or simply Treasury quotes, may be in terms of prices or yields. A Treasury bond quote is based on a $100 par value bond, and instead of using decimals, US treasury quotes use fractions of 32. For example, a quote of 102 1/32 means to purchase a $100 dollar bond, you would pay $102 dollars plus 1/32 of a dollar which is slightly more than $0.03. A bond's yield, formally known as a yield-to-maturity, is the expected annual rate of return for holding the bond until it matures.
US Treasury bond quotes are used for many reasons. For example, corporate bonds and other securities are priced based on the yields of Treasury bond offerings for a similar maturity. You can also use quotes on Treasury bonds of increasing maturity to construct yield curves, which plot expected returns against time.
For the individual investor, understanding and using Treasury bond quotes is a great way to help plan the risk-free portion of an investment portfolio. The steps below will help you:
1. Learn to read and understand Treasury quotes.
2. Find Treasury bond quote providers.
3. Consult with a professional.
Start on the right path and learn to read and understand Treasury quotesThe financial press prints Treasury quotes weekly and sometimes more often. Included with these tables is a guide to reading the quotes. This is a great place to learn about quotes on Treasury bonds. It is also important to monitor trading in Treasury bonds, so you can understand how market forces affect expected returns.
U.S. Treasury Department is a good source of information, explaining bond auctions, the differences between on- and off-the-run bonds as well as providing the results of the most recent auction.
Define your investment plan and find the appropriate Treasury bond quote providerGetting good quotes requires balancing time and money. If all you need to do is see the shape of the yield curve, this is available for free on most websites that provide financial news. On the other hand, a bond trader prefers real time treasury quotes, and this is significantly expensive. For the typical individual investor however, daily or weekly quotes are sufficient.
Consult with a professional to devise the best strategy for your interestsSince your ultimate goal is to direct an investment strategy, it is important to discuss any investment plan with a qualified professional. Treasury bonds can be purchased directly through the US Treasury Department, or indirectly through mutual funds. To determine the best method for you, a careful and complete discussion with an investment professional is highly recommended.
- Investing in Treasury bonds is typically a low-risk practice, meaning it is a low-return investment strategy. However, interest payments from Treasury bonds are free of state and local taxes, while capital gains and dividends may not be. Keep this in mind when planning an overall investment plan.