Please enter valid positive numbers for all fields.
Current Yield:0.00%
Approximate Yield to Maturity (YTM):0.00%
Annual Interest Income:$0.00
Total Gain/Loss at Maturity:$0.00
Understanding US Treasury Bond Rates
US Treasury bonds (T-Bonds) are debt securities issued by the United States Department of the Treasury to finance government spending. They are considered one of the safest investments globally because they are backed by the "full faith and credit" of the U.S. government. Understanding how to calculate the return on these bonds is crucial for fixed-income investors.
Key Metrics Calculated
This calculator determines two primary yield metrics that help investors assess the value of a bond:
Current Yield: This represents the annual return on the dollar amount paid for the bond. It is calculated by dividing the annual coupon payment by the current market price of the bond. While useful, it ignores capital gains or losses if the bond is held to maturity.
Yield to Maturity (YTM): This is a more comprehensive metric. It estimates the total annual return an investor will earn if the bond is held until it matures. YTM accounts for the current market price, the par value, the coupon interest rate, and the time remaining until maturity.
How the Calculation Works
The relationship between bond prices and yields is inverse. When interest rates rise, existing bond prices typically fall, and vice versa. Here is the logic behind the numbers:
Face Value (Par): The amount the bond will be worth at maturity (typically $1,000).
Current Market Price: The price you pay today. Buying below par (discount) increases your YTM; buying above par (premium) decreases it.
Coupon Rate: The fixed percentage of the Face Value that the bond pays annually in interest.
Example Scenario
Imagine you purchase a T-Bond with a Face Value of $1,000. However, due to rising interest rates elsewhere, the bond is trading at a discount price of $950. The bond pays a Coupon Rate of 3.5% and matures in 5 years.
Your Annual Income is $35 ($1,000 × 3.5%). However, your YTM will be higher than the coupon rate (approximately 4.6%) because you not only get the interest payments, but you also gain $50 when the bond matures (the difference between the $950 you paid and the $1,000 face value).
Why Do Treasury Rates Matter?
Treasury rates serve as a benchmark for the entire economy. Mortgage rates, auto loans, and corporate bond yields are often priced based on the spread above US Treasury yields. When Treasury yields rise, borrowing costs generally increase across the economy.
function calculateBondYields() {
// 1. Get Input Elements
var faceValueInput = document.getElementById("bondFaceValue");
var marketPriceInput = document.getElementById("bondMarketPrice");
var couponRateInput = document.getElementById("bondCouponRate");
var yearsInput = document.getElementById("bondYears");
var resultBox = document.getElementById("bondResults");
var errorBox = document.getElementById("bondError");
// 2. Parse Values
var faceValue = parseFloat(faceValueInput.value);
var marketPrice = parseFloat(marketPriceInput.value);
var couponRate = parseFloat(couponRateInput.value);
var years = parseFloat(yearsInput.value);
// 3. Validation Logic
if (isNaN(faceValue) || isNaN(marketPrice) || isNaN(couponRate) || isNaN(years) ||
faceValue <= 0 || marketPrice <= 0 || years = 0 ? "$" : "-$";
document.getElementById("resTotalReturn").innerHTML = totalReturnSign + Math.abs(totalReturn).toLocaleString('en-US', {minimumFractionDigits: 2, maximumFractionDigits: 2});
// Show results
resultBox.style.display = "block";
resultBox.classList.add("visible");
}