Treasury Bond Prices: How Par, Coupons, Yields, and Maturity Fit Together

What this means for investors

A Treasury security can have several important numbers attached to it. For Treasury bills, the face value (or par value) is the amount paid at maturity. For conventional Treasury notes and bonds, face value is the amount paid at maturity to a holder who still owns the security. TIPS have principal that adjusts with inflation and deflation. The interest rate—often called the coupon rate for a note or bond—is set at auction and determines the security’s scheduled interest payments. The price is the amount paid for the security. The yield to maturity is described by the U.S. Treasury as the annual rate of return on the security. These measures are related, but they are not interchangeable. [S1]

For Treasury notes and bonds, the central pricing relationship is straightforward:

Yield to maturity rises relative to the stated interest rate
                    ↓
           Price is below par

Yield to maturity equals the stated interest rate
                    ↓
             Price is at par

Yield to maturity falls relative to the stated interest rate
                    ↓
           Price is above par

The Treasury’s auction examples illustrate this relationship. A 20-year bond with a 1.750% interest rate and a 1.850% high yield had a price of 98.336995 per $100 of par value. A 7-year note with a 1.375% interest rate and a 1.461% high yield had a price of 99.429922 per $100 of par value. In both cases, yield was higher than the stated interest rate, so the price was lower than par. [S1]

That distinction matters because a statement such as “Treasury yields are 3%” does not, by itself, state the auction price of a particular Treasury security. A particular security has its own maturity date, auction-set interest rate, face value, and auction price. Two securities can both be U.S. Treasuries but have different pricing characteristics because their cash-flow structures and maturities differ.

For a quotation, “high” or “low” has meaning relative to a reference point. The usual reference point is par. A price below par means the quoted price is less than the face amount paid at maturity for conventional notes and bonds held to maturity. A price above par means the buyer pays more than face value while the face value remains the maturity payment for a holder who still owns the security. The scheduled interest payments remain based on par value for conventional Treasury notes and bonds, not on the price paid. [S1]

How it works

The U.S. Treasury classifies marketable Treasury securities into several types, each with a distinct pricing and payment structure. Treasury bills are short-term securities maturing in one year or less. Treasury notes mature in 2, 3, 5, 7, or 10 years. Treasury bonds mature in 20 or 30 years. Treasury Inflation-Protected Securities (TIPS) mature in 5, 10, or 30 years, while Floating Rate Notes (FRNs) mature in two years. [S1]

Conventional Treasury notes and bonds

Notes and bonds pay interest every six months. Their interest rate is set at auction, and that set rate applies to the security’s par value over its life. If a holder owns the security at maturity, the Treasury pays back its face value. [S1]

Consider a simplified $1,000-par Treasury note with a hypothetical 4% annual interest rate. The annual interest amount is $40, based on $1,000 of par, generally paid as two $20 semiannual payments. The auction price could be equal to, below, or above $1,000. The price affects the relationship between the security’s payments and the buyer’s amount paid; it does not revise the note’s stated interest rate.

This is why the coupon-versus-yield comparison is a useful starting point for describing auction pricing. When the yield to maturity is above the coupon rate, the price is below par. When yield to maturity is below the coupon rate, the price is above par. When the two rates are equal, the price is par. [S1]

Treasury bills: discount pricing rather than coupon payments

Treasury bills work differently. They are sold at face value or at a discount and mature in one year or less. Rather than paying the semiannual interest associated with notes and bonds, a bill pays its face value at maturity; the difference between the discounted purchase price and face value is described as interest. [S1]

The Treasury provides the following discount-pricing formula:

Price = Face value × [1 − (discount rate × time) / 360]

In the Treasury’s example, a $1,000 26-week bill at a 0.145% discount rate has a calculated price of $999.27. At maturity, it pays $1,000, producing a $0.73 difference. [S1]

A bill has different payment mechanics from a coupon-paying bond: the purchase discount and maturity payment are central to its structure.

TIPS: principal that changes with inflation or deflation

TIPS differ from conventional notes and bonds because their principal adjusts upward or downward with inflation and deflation. The interest rate is fixed, but the dollar amount of each semiannual interest payment can vary because it is calculated using the inflation-adjusted principal. [S1]

The Treasury describes the calculation in three broad steps: identify the relevant index ratio, multiply original principal by that ratio to find inflation-adjusted principal, then multiply that adjusted principal by one-half of the stated annual interest rate to determine the semiannual payment. [S1]

Thus, a fixed TIPS interest rate does not necessarily mean fixed dollar interest payments. The coupon rate remains fixed, while the principal base on which the payment is calculated may change.

Floating Rate Notes: a rate that resets

FRNs also have a different structure from fixed-rate notes and bonds. Their interest rate consists of an index rate plus a spread. The index rate is tied to the highest accepted discount rate of the most recent 13-week Treasury bill and resets weekly; the spread is set when the FRN is first offered and stays fixed for its life. Interest is applied to par amount daily, and aggregate interest earned accumulates daily. [S1]

These differences show why the label “Treasury price” is incomplete without identifying the type of security. A bill’s discount price, a conventional bond’s price relative to par, a TIPS principal adjustment, and an FRN’s floating rate each involve different mechanics.

Comparing the main options

The table is a map of structural differences. In the Treasury’s maturity classifications, a Treasury bond has a 20- or 30-year maturity, while a Treasury note has a 2-, 3-, 5-, 7-, or 10-year maturity. [S1]

US market context

In the United States, Treasury securities are issued through Treasury auctions, where the interest rate for a particular note or bond is set. Auction results can show both a stated interest rate and a high yield, as well as the price. The Treasury’s examples show prices expressed relative to $100 of par value, such as 98.336995 or 99.429922. [S1]

For current-rate context, the Treasury publishes daily Treasury bill rate data with multiple short-term maturities and both bank-discount and coupon-equivalent columns. The displayed data show that published Treasury rate information depends on the maturity and rate convention used. Maturity and column definition are part of the context for a quoted figure. [S2]

For example, the daily bill-rate table includes 4-, 6-, 8-, 13-, 17-, 26-, and 52-week terms, and displays bank-discount and coupon-equivalent measures for those terms. A bill rate does not describe the yield or auction price of a coupon-paying 20- or 30-year Treasury bond; these are distinct security types with different terms and payment structures. [S1] [S2]

Published price availability can also be time-sensitive. One Treasury Federal Investments Program price page states that current-day prices are not available until after 1:00 p.m. EST and instructs users to refresh for the most recent information. This shows that the date, time, and type of quoted Treasury data are relevant context. [S3]

Costs, liquidity, and risks

A clear discussion of Treasury bond prices begins with the distinction between a security’s contractual structure and the price at which it is purchased. For conventional notes and bonds, the Treasury specifies that the interest rate set at auction is paid on par value every six months, while the price can be below, at, or above par. [S1]

For a conventional note or bond held through maturity, the Treasury describes repayment of face value to a holder who still owns the security. The auction price can be above, below, or equal to par, making price a separate measure from face value and stated interest rate. [S1]

For TIPS, inflation and deflation adjust principal, and the semiannual interest amount may consequently vary. For FRNs, the index rate resets every week, although the spread remains fixed for the life of the security. [S1]

The supplied materials do not provide a universal schedule of brokerage commissions, bid-ask spreads, account fees, settlement practices, or secondary-market liquidity measures. Those items are not established by a Treasury security’s quoted price in the materials summarized here.

Quote-reading categories

The following categories describe information that can appear in a Treasury price or quote.

1. Security type. Treasury bills, notes, bonds, TIPS, and FRNs have materially different payment and pricing mechanics. [S1]
2. Maturity. Bills mature within one year; notes range from 2 to 10 years; bonds run 20 or 30 years; TIPS range from 5 to 30 years; and FRNs mature in two years. [S1]
3. Par and price. Face value and the quoted or paid price are separate figures.
4. Stated interest rate and yield to maturity for a note or bond. Their comparison places the Treasury’s price framework below par, at par, or above par. [S1]
5. Payment pattern. Conventional notes and bonds pay every six months. Bills use discount pricing and pay face value at maturity. [S1]
6. TIPS fixed rate and adjusted principal. The coupon rate is fixed, but adjusted principal and resulting dollar payments can vary with inflation or deflation. [S1]
7. FRN index and spread. The index resets weekly, while the spread remains fixed. [S1]
8. Quote timing and convention. A daily bill-rate table may show bank-discount and coupon-equivalent figures, and published prices may be subject to update timing. [S2] [S3]

Common misconceptions

“The coupon rate and yield are the same thing.” Not necessarily. The Treasury’s examples show different coupon and yield figures for the same security. Where yield was higher than the interest rate, the price was below par. [S1]

“Below par means the Treasury will repay less than face value at maturity.” For the conventional notes and bonds described by the Treasury, face value is paid at maturity to a holder who still owns the security. A below-par price refers to the purchase price relative to that face value. [S1]

“All Treasury securities pay a coupon twice a year.” Bills do not follow the note-and-bond coupon structure. They are sold at par or at a discount and pay face value at maturity. TIPS and FRNs also have distinct mechanisms. [S1]

“A fixed TIPS rate means a fixed dollar interest payment.” The TIPS rate is fixed, but principal changes with inflation or deflation, which can change each semiannual interest payment. [S1]

“A Treasury rate quote is universally comparable.” Rate tables can show different maturities and different conventions. The daily Treasury bill table, for example, includes both bank-discount and coupon-equivalent columns. [S2]

Frequently asked questions

What does a Treasury bond price of 98 mean?

In a par-based quotation framework, it means a price below the $100 par reference. The Treasury’s auction examples use prices such as 98.336995 and 99.429922 when the yield was higher than the stated interest rate. [S1]

Why can a Treasury bond have a price above par?

The Treasury states that a bond or note’s price may be above par when yield to maturity is less than the security’s interest rate. [S1]

Does a Treasury note pay interest on the price paid?

The Treasury describes interest on notes and bonds as being earned at the set rate on par value. The price may be above, below, or equal to par. [S1]

How is a Treasury bill’s price calculated?

The Treasury provides a discount formula based on face value, discount rate, and time divided by 360. A bill purchased below face value pays face value at maturity. [S1]

Why might a TIPS interest payment change if its rate is fixed?

The interest payment is based on inflation-adjusted principal. Since principal may rise or fall with inflation or deflation, the payment amount may vary. [S1]

What resets on a Floating Rate Note?

The FRN’s index rate resets every week and is tied to the highest accepted discount rate of the most recent 13-week Treasury bill. Its auction-set spread remains fixed. [S1]

Historical lessons

The enduring lesson from Treasury pricing is conceptual: name the measure before drawing a conclusion. Face value, stated interest rate, price, and yield to maturity each answer different questions. Treating them as synonyms obscures how a Treasury security works.

The Treasury’s own auction examples supply an illustration. A 20-year bond and a 7-year note both had yields above their stated interest rates, and both were priced below par. The examples demonstrate the price/yield/coupon relationship without an assumption that a particular level of yields, prices, or rates will persist. [S1]

A second lesson is that security design matters. Bills, conventional notes and bonds, TIPS, and FRNs are all Treasury marketable securities, but their payment and adjustment rules are not identical. Discount-to-face-value mechanics for bills, principal adjustment for TIPS, and weekly index resets for FRNs cannot be reduced to the conventional fixed-coupon note-or-bond model. [S1]

Finally, Treasury data have date, maturity, and convention context. Daily bill-rate data list several maturities and distinguish bank-discount from coupon-equivalent figures. A number without its maturity, rate convention, or timestamp is incomplete context rather than a full description of a Treasury security’s price or yield. [S2]

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