Interest rate update

One-year Treasury bills (T-bills) are issued every four weeks, following a structured process: The U.S. Treasury announces the offering on a Thursday, holds the auction the following Tuesday, and settles the securities that Thursday. Payment is due at settlement, and interest accrues from that date. Treasury bills (T-Bills) are sold at a discount to their face value and mature at par, with a minimum investment of $1,000.

For one-year T-Bills, the relationship between price and yield is approximately linear. A 1.00% discount yield translates to a price of about 99% of face value, or $990 per $1,000. Similarly, a 5.00% discount yield corresponds to a price of roughly $950. Treasury prices are quoted as a percentage of par value.

However, the discount yield is not the actual return on investment. For instance, purchasing a one-year T-Bill at $950 and receiving $1,000 at maturity results in a true yield of approximately 5.26% ($50/$950).

Shorter-term T-bills, offered in 4-, 8-, 13- and 26-week maturities, are issued weekly. In these cases, price is a function of time. A six-month T-Bill with a 5.00% discount yield would have a price of approximately $975, reflecting the shorter investment period.

Understanding the pricing mechanics of T-Bills is essential for evaluating investment returns accurately. While discount yield provides a quick reference, actual yield to maturity better reflects the return on capital.

The bond market trades 24/7. The Federal Reserve meets eight times a year. Bonds lead the Federal Reserve.

Source: All data from Bloomberg. Rates are not guaranteed and are subject to change.

This information does not constitute investment advice. The information is general in nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. All expressions are opinion subject to change without notice in reaction to shifting market conditions. Examples provided are for illustrative purposes only and not intended to be reflective of results you can expect or achieve. There is no guarantee that the views and opinions expressed in this document will come to pass.

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