U.S. Treasury Yield at 4.5%: What Will I Actually Get After Buying?
When many people first see US Treasuries, the easiest thing to do is misread a number.
When you see 4.5% advertised in the market, it’s easy to mentally fill in a simple phrase: “If I invest now, I will reliably earn 4.5% every year and continue receiving it until maturity.”
This statement is only half right.
4.5% often aligns more closely with an “annualized yield metric,” and does not mean that you receive cash of 4.5% every year. What actually reaches your account is the result calculated from three factors combined: coupon payments, the purchase price, and principal repayment at maturity.