You can find daily updates on the prices and yields for Treasury bills, notes, and bonds and for corporate bonds on the Wall Street Journal Web site or on Yahoo finance (finance.yahoo.com).
Treasury Bonds and Notes
The table below contains data on five U.S. Treasury bonds and notes from the many bonds and notes that were being traded on secondary markets on July 16, 2010. Treasury notes have maturities of 2 years to 10 years from their date of issue; Treasury bonds typically have a maturity of 30 years from their date of issue.
The first two columns tell you the maturity date and the coupon rate. Bond A, for example, has a maturity date of August 15, 2015, and a coupon rate of 4.250%, so it pays $42.50 each year on its $1,000 face value. The next three columns refer to the bond’s price.
All prices are reported per $100 of face value. The numbers following the colon refer to thirty-secondths of a dollar. For Bond A, the first price listed, 112:08, means “112 and 08/32,” or an actual price of $1,122.50 for this $1,000 face value bond.
The bid price is the price you will receive from a government securities dealer if you sell the bond. The asked price is the price you must pay the dealer if you buy the bond. The difference between the asked price and the bid price (known as the bid–asked spread) is the profit margin for dealers.
Bid-asked spreads are low in the government securities markets, indicating low transactions costs and a liquid and competitive market. The “Chg” column tells you by how much the bid price increased or decreased from the preceding trading day.
For Bond A, the bid price rose by 8/32 from the previous day. The final column contains the yield to maturity, calculated using the method we discussed for coupon bonds and the asked price. The Wall Street Journal reports the yield using the asked price because readers are interested in the yield from the perspective of the investor.
So, you can construct three interest rates from the information contained in the table: the yield to maturity just described, the coupon rate, and the current yield (equal to the coupon divided by the price: $42.50/$1,122.50, or 3.79% for Bond A).
Note that the current yield of Bond A is well above the yield to maturity of 1.7066%. This illustrates that the current yield is not a good substitute for the yield to maturity for instruments with a short time to maturity because it ignores the effect of expected capital gains or losses.
Treasury Bills
The table below shows information about U.S. Treasury bill yields. Recall that Treasury bills are discount bonds, unlike Treasury bonds and notes, which are coupon bonds. Accordingly, they are identified by only their maturity date (first column).
In the Treasury bill market, following a very old tradition, yields are quoted as yields on a discount basis (or discount yields), rather than as yields to maturity.* The bid and asked columns of Treasury notes and bonds quote prices, while the bidand asked columns for Treasury bills quote yields.
The bid yield is the discount yield for investors who want to sell the bill to dealers. The asked yield is the discount yield for investors who want to buy the bill from dealers. The dealers’ profit margin is the difference between the asked yield and the bid yield.
In comparing investments in Treasury bills with investments in other bonds, investors find it useful to know the yield to maturity. So, the last column shows the yield to maturity (based on the asked price).
Note that in both previous tables, the yield to maturity rises the further away the maturity date is.
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