A customized derivative security used by investors to lock in the yield or price of a treasury security. 



|||The lock acts like a separate security in addition to the treasury because it guarantees a fixed return. 

Treasury locks are cash settled, and the parties involved, depending on their respective side of the transaction, pay the difference between the lock price and the market interest rates. For example, an investor purchasing a treasury lock at 5% is required to pay the seller the difference between the market interest rate and the lock rate if the market rate is higher. Conversely, if the market rate is lower than the lock price, then the investor will receive the difference.