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Clear out junk files and repair common Windows errorsFree Scan →Scan for outdated or missing drivers - takes under a minuteDriver Scan →For a conventional fixed-rate Treasury note or bond, price and yield to maturity move in opposite directions. If market yields rise, its fixed coupon becomes less attractive and its price generally falls; if market yields fall, the price generally rises. To compare a quote, distinguish the security’s stated interest rate from its yield to maturity, then check the price relative to face value, the instrument type and remaining maturity.
Why Treasury prices and yields move in opposite directions
An existing fixed-rate Treasury pays the coupon set when it was issued, even when it is resold. If newly available securities offer higher yields, buyers will generally pay less for an older security with a lower fixed coupon. The lower purchase price raises the return implied by its remaining payments. If market yields fall, an older security with a comparatively higher coupon can command a higher price.
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The SEC Office of Investor Education and Advocacy summarizes the relationship in its Investor Bulletin dated June 26, 2013: “market interest rates and bond prices move in opposite directions—for example, when market interest rates go up, prices of fixed-rate bonds fall.” This describes the general relationship for fixed-rate bonds, not a promise that every security’s price changes by the same amount.
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1Clear out junk files and repair common Windows errors2Scan for outdated or missing drivers - takes under a minute3Repair Windows errors before they cause bigger problemsCoupon rate, yield to maturity and price are different things
- Interest rate or coupon: For a note or bond, the stated rate applied to face value to determine its fixed interest payments. Treasury notes pay interest every six months; the stated rate does not change because the security is traded.
- Yield to maturity (YTM): A return measure associated with the security’s price and remaining payment stream, assuming it is held to maturity under the measure’s assumptions. It is not the coupon rate.
- Price: What the security is valued or offered for in the market, commonly compared with its face value (par). A price below par is a discount; a price above par is a premium.
TreasuryDirect’s Understanding Pricing and Interest Rates gives a practical rule for notes and bonds: if YTM is greater than the stated interest rate, the price is below par; if the rates are equal, the price is at par; and if YTM is lower than the stated rate, the price is above par.
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How to compare a Treasury quote
- Identify the security. Determine whether the quote is for a bill, note, bond, Treasury Inflation-Protected Security (TIPS) or Floating Rate Note (FRN). Their payment structures differ.
- For a fixed-rate note or bond, compare YTM with the stated rate. A higher YTM corresponds to a below-par price; a lower YTM corresponds to an above-par price.
- Check the remaining maturity and coupon. Compare securities with similar maturities and coupons when considering how strongly prices might respond to market-rate changes. For fixed-rate securities, longer maturity and lower coupon generally mean greater sensitivity.
- Check the quote date and source. Prices and yields change. For an actual purchase, use the current quote and its transaction and settlement details; Treasury securities can be bought at auction or in the secondary market.
A displayed price may not, by itself, describe every amount involved in a particular secondary-market transaction. Review the broker’s full quote and settlement details rather than inferring the total from a price figure alone.
SEC example: the same Treasury as market yields change
The SEC bulletin provides an illustration—not a current quote or forecast—of a 10-year Treasury with a 3% coupon. The examples show how its price changes as the market yield changes, with nine years remaining after one year:
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| Illustrative case | Market yield / YTM | Price | Relationship |
|---|---|---|---|
| At issue, with 10 years remaining | 3% | $1,000 | Coupon and yield are both 3%; price is at par. |
| One year later, with nine years remaining; market rates fall | 2% | $1,082 | The 3% coupon is above the market yield; price is above par. |
| One year later, with nine years remaining; market rates rise | 4% | $925 | The 3% coupon is below the market yield; price is below par. |
These are the SEC’s published illustrative figures. They show the direction of the relationship; they should not be treated as live market data or as a prediction for another Treasury.
Not every Treasury has the same payment structure
TreasuryDirect identifies five types of marketable Treasury securities. The simple coupon-versus-YTM comparison is most direct for conventional fixed-rate notes and bonds; other securities require attention to how their payments are determined.
| Security | Payment structure relevant to comparison | What to keep in mind |
|---|---|---|
| Treasury bill | Short-term security with a maturity of one year or less, sold at face value or at a discount. The discount relative to face value represents interest. | It does not use the same fixed semiannual coupon structure as a note or bond. |
| Treasury note | Fixed interest paid every six months; issued with 2-, 3-, 5-, 7- or 10-year terms. | It can be held to maturity or sold earlier; a secondary-market price can differ from face value. |
| Treasury bond | Fixed interest paid every six months. | Compare its stated rate and YTM, along with remaining maturity and market price. |
| TIPS | Principal adjusts with inflation and deflation, while the interest rate is fixed; the dollar interest payment can vary as adjusted principal changes. | The payment base changes, so do not treat it as identical to a conventional fixed-coupon note or bond. |
| Floating Rate Note (FRN) | Its index rate is 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. | Its rate structure differs from a fixed coupon. |
TreasuryDirect’s pages on Treasury Notes, Treasury Marketable Securities and Floating Rate Notes explain these terms and structures.
How much can a price move?
The inverse direction does not tell you the size of a price change. The SEC notes that maturity and coupon affect how much a bond’s price generally changes when market rates move. All else equal, a longer-maturity fixed-rate security or one with a lower coupon tends to be more sensitive to a rate change than a shorter-maturity or higher-coupon security. The size of any actual move depends on the security and the market change; the examples above should not be generalized into a forecast.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Where Treasury securities are bought and why quotes need dates
Treasury marketable securities are transferable and may be sold before maturity. Investors can buy them at Treasury auctions or in the secondary market, but an auction result is not a standing current market quote. TreasuryDirect’s FAQs about Treasury Marketable Securities describe the auction and secondary-market routes. When comparing two figures, confirm that they refer to the same kind of security and note when and where each price or yield was quoted.
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