How FRED Three-Month Treasury Bill Rates Are Quoted

Summary

The document clarifies that FRED’s three-month Treasury bill series reports an annualized yield, while “three-month” refers to the bill’s maturity. The example rate is therefore not the return earned over a single three-month holding period. Treasury bills are zero-coupon discount instruments: investors pay below face value and receive face value at maturity.

The explanation describes the discount-yield convention, which annualizes the price discount using an ACT/360 day-count basis and the bill’s actual days to maturity. Because bills are auctioned weekly, a daily observation reflects the annualized yield of the most recently auctioned bill based on its price; the cited monthly series appears to average business-day observations. The document is a brief explanation rather than a complete guide to yield conventions, and its description of monthly aggregation is presented as an apparent interpretation, not a demonstrated calculation.

Key ideas

• The three-month label identifies the Treasury bill’s maturity, not the quoted rate’s accrual period.
• FRED Treasury bill yields are annualized and use a discount-yield convention.
• The convention uses an ACT/360 basis and the actual number of days to maturity.
• The monthly series is described as appearing to average daily business-day observations.

Tags

# Are 3 month t-bill rates in FRED annualized?


# Are 3 month t-bill rates in FRED annualized?












Are the 3 month t-bill rates documented by FRED here annualized? For example, the rate for January 1997 is 5.03%. Does that mean one would get a 5.03% return in 3 months, or is that an annualized rate?

## Answer by AlRacoon (score 5, accepted)

https://quant.stackexchange.com/a/37729

Yes t-bill rates are annualized. T-bills are zero coupon bonds and all of the interest is therefore paid at maturity. They are discount instruments and you will receive face value at maturity which includes the interest. The interest is calculated using ACT/360 day count convention and FRED shows the yield on a discount basis.

The discount yield is calculated as follows:

discount yield (%)= (Face Value - Price)/Price * 360/ACT * 100%

Act = the Actual number of days until maturity

Since t-bills are auctioned on a weekly basis, the rate that you see will be the annualized yield of the current (most recently auctioned) t-bill based on the price on that day.

On the chart that you link to, that is a monthly series. It appears that they take the average of the calculation above for all the business days in the month.

## Answer by Simbod (score 4)

https://quant.stackexchange.com/a/37730

Yes, all t-bill or other interest rates on the FRED website are annualized!!! The 3-months only refer to the maturity time.

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.