Treasury Index

The U.S. sells Treasury bills (less than a year long holding), Treasury notes (mature in fewer than ten years), and Treasury bonds (mature at 20 or 30 years). Through these different debt vehicles, the U.S. controls the money supply, which affects the economy...inflation, specifically. In addition to taxes, these securities generate some income for the U.S. Treasury.

All of these U.S. Treasury securities are tracked on the Treasury index: an index based on what those securities are being auctioned off for. That means it’s basically an index summarizing the daily yield curve, which is what you can expect to get back in returns on U.S. Government debt securities. Long-term Treasuries with high yields indicate that investors have a good feeling about the economic future.

Banks use the Treasury index all of the time as a baseline for writing mortgage notes (the document you sign that makes you officially obligated to pay your mortgage when you buy a house) and interest rates for other types of loans. Interest rates and the U.S. debt securities are tied together. When Treasury yields rise, interest rates usually rise as well.