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Day-Count Conventions for U.S. Treasury Bills, Notes, and Bonds

Article Quant Q&A · Author: Count
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Summary

The discussion asks which day-count convention applies to U.S. Treasury bills, notes, and bonds, and who sets the rules. It contrasts a general claim that bills use Actual/360 and Treasury bonds use Actual/365 with an answer pointing to the Treasury’s published rules for marketable securities. That answer identifies Actual/Actual for interest calculations on Treasury notes and bonds, directing readers to the relevant Treasury regulations and formulas. The exchange therefore cautions against applying a broad market convention without checking the instrument’s governing documentation.

The accepted answer also notes that conventions became entrenched through market practice and references, and says Actual/360 can be a reasonable assumption for estimation or nonstandard over-the-counter pricing if clearly disclosed. That is a general modeling suggestion, not a statement of the official convention for every Treasury security. The short exchange does not explain bill pricing calculations in detail or resolve every instrument-specific case; users should consult the applicable Treasury rules and security terms.

Key ideas

  • The discussion distinguishes common market conventions from the rules applicable to specific Treasury securities.
  • The answer points to Actual/Actual for interest calculations on Treasury notes and bonds under Treasury rules.
  • Day-count conventions developed through established market practice, so some variation exists across products.
  • Actual/360 may be used as an explicit estimation assumption for nonstandard pricing, but should not be mistaken for an official Treasury rule.
  • Instrument-specific calculations should be checked against the governing Treasury documentation.

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Fixed incomeDerivatives pricingStatistics
Full text
# Day-Count-Conventions T-bills, T-notes and T-bonds


# Day-Count-Conventions T-bills, T-notes and T-bonds












I have a question regarding the day count conventions for T-bills, T-notes and T-bonds. So far I haven't found an official page that clearly states which method is used and I don't own bloomberg etc. to look it up myself. I have also looked at the TreasuryDirect website but it is not there either. However, Investopedia states that:

> Actual/360 is most commonly used when calculating the accrued interest for commercial paper, T-bills . . . Actual/365 is most commonly used when pricing U.S. government Treasury bonds...

Can someone tell me if this is correct and why the term "commonly" is used, i.e. are there T-bills/T-bonds that have other day count conventions? Also who defines which method is used. The U.S. Treasury ?

Thans in advance.

## Answer by R110 (score 3, accepted)

https://quant.stackexchange.com/a/62027

I’m going to go on a limb and suggest that it was Stigum’s Money Market back in the late 70’s that formalised many of these conventions. This was the major reference at the time the bond and money markets exploded in size and volume. Along with academic / practitioner stalwarts like Frank Fabozzi, these conventions just became entrenched (and also why there is still some variation).

The book is still a great read today for any quant.

Using Actual/360 is always a reasonable choice for any estimation or pricing. As usual, just make it clear that’s what you’ve used if you’re pricing something OTC / non vanilla.

## Answer by Saitama (score 1)

https://quant.stackexchange.com/a/76472

It is Act/Act. You can check the document "SALE AND ISSUE OF MARKETABLE BOOK-ENTRY TREASURY BILLS, NOTES, AND BONDS Appendix B to Part 356—Formulas and Tables I. Computation of Interest on Treasury Bonds and Notes.

Shown in full with attribution under the source's licence. Licence: CC BY-SA 4.0 (Stack Exchange)

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.