Treasury Lock
Treasury Lock
Since the interest rates on certain treasury securities are variable, and a lot of investors prefer a fixed rate of return, they purchase a treasury lock. They purchase this from another person to lock in the interest rate and make it fixed. For example if the current interest rate is 4%, the owner of the treasury security may purchase a lock. However if the interest goes up, the person selling the lock will get the gain in interest rate for themselves. However if it goes down, the holder of the lock will not take the hit.
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