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Risk Free Rate for UK and US

Note, finding a risk-free rate is complicated not just by the alternative sources available, but also because the risk-free rate required can depend on the context of its use.

  • The most requested is Thomson Reuters3 month Treasury bills, recommended by Thomson Reuters (Datastream) and many others. There is the  most historical data for these. For example the UK, UKGBILL3 (monthly – base date Jan 1972) and UKTBTND (daily – base date 04 Jan 1985). See Risk Free Rates on Datastream (October 2013) for more detail.
  • Fama French benchmark factors are calculated using 1 month Treasury bills, but historical data can be limited. For example, the UK UKTBT1M on Datastream has a base date of 10 Mar 2000.
    See also Risk Free Rate and Fama French factors – posted Jan 2013
  • Bloomberg Bloomberguses 10 year government bond rates as the risk-free rate in its Country Risk Premium (CRP) and related functions. (This makes it easier to handle countries that do not issue Treasury bills in a consistent fashion.)

(For those interested there is a paper “What is the riskfree rate?” on Damodaran Online.)

The last Risk Free Rate post was Nov 2009. These updates have been prompted by queries and also recent news. With the turmoil about the US credit downgrade at the beginning of this month, there is of course debate about what is the risk-free rate if there is a chance of a country defaulting.  For example see:

So what to choose as a good estimate of the theoretical risk-free rate could get harder rather than easier.

  1. Uday Srikanth
    2 March 2012 at 7:57 am

    how to I get Risk free rate and equity risk premium in datastream. I got this data from Bloomberg using CRP function. Please assist.

  2. markgreenwood
    2 March 2012 at 2:07 pm

    The risk free rate used by Bloomberg is the yield on a 10 year treasury security (10 year govt bond / gilt ) which is available in Datastream. Many researchers use the yield on a 3 (or 1) month treasury rather that the 10 year one as mentioned above.

    The equity risk premium is calculated by Bloomberg as the “Expected Return on Market” -(minus) “Risk Free Rate”. To be honest, I do not fully understand how the “Expected Return on Market” is calculated but it is done with reference to the market index UKX (the FTSE 100). The CRP Help page describes the dividend yield, the growth rate, the payout ratio, and the expected market return but you need more financial knowledge than I have to understand the calculations described.

    I don’t think that the “Expected Return on Market” or the “Equity Risk Premium” are directly available on Datastream. You would have to do the calculations to get these from the basic data.

  3. jyoti
    7 March 2012 at 11:09 am

    i m working on assignment where i found beta using 10 yr data of a company. now to calculate capm do i need to find 10 yr risk free rate or 3 months? what is risk free rate for uk govt bonds?

    • markgreenwood
      8 March 2012 at 9:48 am

      The risk free rate is a theoretical rate. For your assignment, you need to choose the rate that is the best approximation to this theoretical rate for your analysis. (This may depend on the availability of the data.) For UK, I’d recommend using the 3 month treasury bill rate unless you have a reason for choosing a different UK govt bond / gilt rate. Various sources are mentioned in the FAQ answer above.

  4. Brian Ho
    26 July 2012 at 7:05 am

    I am currently working on my dissertation, I want to access to the Thomson Reuters Datastream on my own laptop, where can I find the datastream ? as I cannot find it on the Reuters site.

    thanks .

  5. EVA
    16 July 2013 at 10:35 am

    I am working on my dissertation and I want to calculate the market risk premium, but I am confused that whether I need to average the market returns using FTSE ALL SHARE and how can I use the daily data of the 3 month treasury bill rate? Is it the annual discount rate? or just 3 months and I need to transfer it into annual rate?

  6. Binta
    30 September 2013 at 5:06 pm

    How can I find UK’s risk free rate or risk premium rate please because I need it for my dissertation. Thanks.

  7. Simon
    16 November 2013 at 1:24 pm

    How can you use the annualised interest rates of a 3 month T-Bill if I want to examine daily excess returns? I want to have the daily risk free rate and I somehow cannot believe that an annualised interest rate may serve as a daily risk free rate, or am I wrong?

    • markgreenwood
      17 November 2013 at 8:42 am

      Take a look at https://bizlib247.wordpress.com/2013/01/18/risk-free-rate-and-fama-french-factors/
      If you have the daily annualised interest rates for a 3 month T-Bill, you can calculate the equivalent daily return by finding the 250th root (assuming 250 trading days per year).
      For an annualised rate of 3.2% you could use the Excel formula – POWER((1 + 3.2/100), 1/250 )

      • Simon
        17 November 2013 at 4:43 pm

        Thanks a lot, Mark! That’s what I thought… I haven’t found too much info about that though!

  8. Kamal Gupta
    5 February 2014 at 8:05 am

    i am currently working on my thesis. I need to know how to calculate the daily-risk free interest rate with given annualized cut-off yield percentage from RBI site.

  9. Kamal Gupta
    5 February 2014 at 8:14 am

    I am taking data from april 2003 to March 2013. I have read a paper in that it is written that the yield cut-off rate is converted into daily prices on the basis of date of issue of biil and after that trading period.

  10. Ana
    13 March 2014 at 7:40 pm

    Hi I am looking for 3 months treasury bill rate for Portugal, Netherlands, Germany, Austria and Denmark from 4 quarter 2002 until 2 quarter 2012 can I find it in Bloomberg or in Datastream? Thanks Ana

    • markgreenwood
      14 March 2014 at 8:09 am

      Hi Ana, You will probably not get a 3 month treasury bill rate for all these countries because they might not all issue 3 month treasury bills. In this case you need another rate as a good proxy for the theoretical risk-free rate.

      Following my suggestion for Datastream – https://bizlib247.wordpress.com/2013/10/25/risk-free-rates-on-datastream/ – there is TRPT3MT (Portugal), TRNL3MT (Netherlands), TRBD3MT (Germany), TRDK3MT (Denmark) but nothing for Austria. There is TREU3MT (Euro area) that could be a reasonable proxy for Austria. However some of these don’t have historic data from 2002.

      The advice on the Datastream extranet – Thomson Reuters (2009) Risk free interest rates – does not cover all of these countries. You could look up interest rates for Austria and choose ASVIB3M as a resonable proxy for an austrian risk free rate. Another approach would be to look at the short-term interest rate from OECD statistics – following advice from http://researchfinancial.wordpress.com/2014/02/06/risk-free-rate-data-sources/

      Bloomberg investigation will take some time but you can always ask the nice people on the Bloomberg help desk.

  11. Jessica
    29 March 2014 at 2:24 pm

    Hi mark,
    I found this very useful for my dissertation, however I need to calculate CAPM and I’m wondering if I should use the 3 month risk free rate for the UK that I sourced: 0.39. Or would i have to multiply it by 4 to make it an annual rate ?
    sorry I’m a little confused. hopefully you can help me out.

    thank you


    • markgreenwood
      30 March 2014 at 7:21 pm

      Hi Jess,
      I am going to assume that you have sourced data for 3 month UK government bonds (treasuries/T-bills) as this is the most common choice as an estimate for the theoretical risk free rate. Unless your source says otherwise a figure of 0.39 for UK 3-month T-bill is the equivalent annual yield (so you don’t multiply it by 4). Annual yields are used so that figures are comparable for government bonds of different maturity dates.

  12. karim
    17 October 2014 at 2:46 pm


    i am writing my thesis and i need to estimate my capm model. i am using the 3 month treasury bill for my risk free rate and using historiacal betas, but i dont know how to get the market risk premium? what am i supposed to take for that and how do i find it on datastream? it is not the TOTMKCN right?

    thnak you

  13. 9 November 2014 at 3:50 am

    Reblogged this on fblfabulous.

  14. Tarek
    17 January 2015 at 12:57 pm

    if i have a portfolio including stock from us and uk how to estimate the risk free rate to calculate the efficient portfolio

    • Mark Greenwood
      19 January 2015 at 10:41 pm

      [To the best of my knowledge there is no definitive correct answer]
      If your portfolio is being held by a US firm/individual then you could calculate the returns in US dollars and estimate the risk free rate using US Treasury Bills.
      If your portfolio is being held by a UK firm/individual then you could calculate the returns in UK pounds and estimate the risk free rate using UK Treasury Bills.

  1. 25 August 2011 at 1:48 pm
  2. 18 January 2013 at 12:42 pm
  3. 8 March 2013 at 8:16 am
  4. 25 October 2013 at 5:50 pm

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