When looking at say Bloomberg or CNBC news on television, one often sees different yields for US treasuries pop up. For example:

Yield curve on CNBC

What does this represent? How are these numbers determined?

It can't be their yield from the government since they are not issued in real time, only at certain dates as far as I understand.

  • @Downvoter why is this a bad question? – user123124 Aug 14 '19 at 8:38
  • Not down voter, but you should provide some examples. If you are using a Bloomberg terminal, there are commands to get detailed information on the quoted items. – Morrison Chang Aug 14 '19 at 8:43
  • @MorrisonChang this is just during the news and all the differents notes are listed with thier percentage change. – user123124 Aug 14 '19 at 8:44
  • 1
    Each (not-yet-redeemed) issue has its own CUSIP, which allows you to tell the maturity and coupon (if any) if not explicitly stated. In the fairly few cases where an issue is 'reopened' -- more issued at certain intervals such as 6mo or 1yr after the initial issue -- you don't need to know when a particular bond was issued; its value depends only on coupon and maturity, plus the current market rate it needs to match. PS: it's called the 'secondary' market not 'secondhand'. . – dave_thompson_085 Aug 14 '19 at 11:47

U.S. Treasury pricing is done via auction at time of issuance and traded like any other financial instrument (i.e. stocks/bonds) where the price/value is agreed upon by the seller and buyer.

U.S. Treasuries are broken up into maturities like: 1 month, 3 month, 6 month, 1 year, 5 year, etc. and that creates the yield curve. See What is the yield curve? for details.

To be clear, the Yield Curve is just the collection of current expectation of yield of a given maturity.

Trading US treasury bills and notes needs to take into account when was the original issue and what is the current yield curve. For example on 08/13/19, a 1 Year Treasury bill's yield was 1.86 percent, but earlier in the year the 1 year bill had a higher rate so if I bought a 1 year bill in January and wanted to sell it, the price/value of bill would adjusted to a matching maturity since there is less than half a year on the 1 year bill left along with an appropriate yield.

Bloomberg itself may show the full yield curve or just a few important Treasury note yield values like the 10 year which affect mortgage rates. See: Why do 10 year Treasury bond yields affect mortgage interest rates?

Follow up from OP:

"To be clear, the Yield Curve is just the collection of current expectation of yield of a given maturity.". How are these expectations i.e the exact yield established?

Realize that as you go longer (further in time) with maturity, less is known about the global/US economy so more opportunity/inflation risk is taken and therefore in general a higher yield is expected to given to lock up that money for that period, even if its the 'risk-free' U.S. Government kind.

As mentioned by others, as there is secondary market for U.S. Treasury Bills/Notes/Bonds where the yields vary based on expectations. If you've read both the links I've referenced can you quote those for any confusion you may have as each maturity has their own circumstances.

Do realize that the current flatting to inversion of the yield curve just means that market is pricing in 'volatility' of events in the "near term" where "near term" is around 1-2 years. As a leading indicator with a track record, the yield curve a simple one upon which to build a narrative for.

  • "To be clear, the Yield Curve is just the collection of current expectation of yield of a given maturity.". How are these expectations i.e the exact yield established? – user123124 Aug 16 '19 at 17:43
  • @user1 Updated answer. If you read both links and the other answer(s) here and are still confused, please try to explain in your own words what you think the factors are so others can provide guidance. – Morrison Chang Aug 17 '19 at 2:01
  • The yield here is what is referred to a "current yield" ? investopedia.com/terms/b/bond-yield.asp – user123124 Jan 19 '20 at 6:44
  • When traded each individual bills, notes, and bonds' value/price would be adjusted to match the "current yield curve" but otherwise the link is correct that for the formula given: The current yield and the coupon rate are incomplete calculations for a bond's yield because they do not account for the time value of money, maturity value or payment frequency. More complex calculations are needed to see the full picture of a bond's yield. – Morrison Chang Jan 19 '20 at 7:18
  • wait..is the "yield curve" containing YTM or "current yields" ? – user123124 Jan 19 '20 at 8:05

The yield of a bond is a function of the coupons it pays (both how much and how many) and the market price. Since these bonds trade in the secondary market continuously, yields can be computed in real-time. As the price of a bond goes down, the yield goes up (because you get more back relative to the price).

Intuitively, if I have two bonds that pay the same coupons, but I can buy one for $100 and one for $99, the $99 bond will have the higher "yield" since I get the same money back but paid less for it.

Yields are always shown in ticker tapes because yields are comparable across bonds, but price may not be (since different bonds pay different coupons).

Just like the price of a stock, the more people want to buy a bond, the lower the price in the market, and thus the higher the yield.

  • You know if the yield in the yield curve is "current yield" or YTM? – user123124 Jan 19 '20 at 9:53

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