Risk Free Rates on Datastream
A couple of business library blogs have mentioned the risk free rate recommendations on the Thomson Reuters Datastream extranet – see Risk free rates, T-Bills, Benchmark bonds (Databaser, Oct 2013) and Datastream – Risk free rate (Aberconway Library, Sept 2011). The first recommendation is to use 3 Month Treasury Bills where possible (Thomson Reuters, 2009). Unfortunately, these recommendations have not been updated recently. Some of the series mentioned are now dead (i.e. do not give up to date data), including those for the US and UK.
- USTBL3M – 03/07/1989 – 01/05/2007, Daily, US TREAS.BILL 3M(USE FRTBS3M)’DEAD from Financial Times
- FRTBS3M – 04/01/1954 – present, Daily, US T-BILL SEC MARKET 3 MONTH from Thomson Reuters
- FRTBW3M – 08/01/1954 – present, Weekly, US T-BILL SEC MARKET 3 MONTH from Federal Reserve, United States
- TRUS3MT – 04/01/1954 – present, Daily, TR US T-BILLS BID YLD 3M from Thomson Reuters
- UKGBILL3 – 31/01/1972 – 31/10/2011, Monthly, UK 3 MONTHS TREASURY BILLS YIELD from UK Office for National Statistics (ONS)
- UKTBTND – 04/01/1985 – present, Weekly, UK TREASURY BILL TENDER 3M from UK Debt Management Office
- TRUK3MT – 02/01/1975 – present, Daily, TR UK T-BILLS BID YLD 3M from Thomson Reuters
By default these express the 3 Month T-Bill rate as an anualised percentage yield (comparison chart below). However FRTBS3M and UKTBTND also have datatype RI – total return index – which makes calculating a monthly/weekly/daily return easier. See comment March 3 1014 below.
Thomson Reuters have government bond benchmark lists by country – Datastream code LTRXXBMK where XX is the country code. In total Datastream has benchmark lists for 47 countries with 32 having a 3 month rate, e.g. TRNL3MT for the Netherlands. (For example see comment March 2014)
For the examples above, LTRUKBMK is the UK list and LTRUSBMK is the US list, with TRUK3MT the UK 3 month rate and TRUS3MT the US 3 month rate.
The choice of the 3 Month Treasury Bill as the risk free rate is very common but not universal. Some choose 1 Month Treasury Bills (4 week) where these are available – see Risk Free Rate and Fama French Factors (Jan 2013)
Risk Free Rate for UK and US (August 2011) is a good starting point if you are looking for alternative sources.
The Thomson Reuters extranet recommendations (Thomson Reuters, 2009) have been mentioned in a previous post Risk Free Interest Rate (November 2009) and do not seem to have been updated since then.
Thomson Reuters (2009) Risk free interest rates. Available at: (Datastream extranet) http://extranet.datastream.com/data/Exchange%20&%20Interest%20Rates/RiskFreeInterestRates.htm (Accessed: 25 October 2013).
A comparison between the US risk free rate returns from Datastream ( PCT#(FRTBS3M(RI),1Y) ) and annual factors from Ken French – see comment below.
The 2000 figure is 6.05 from Datastream and 5.88 from Ken French’s annual factors.
We would not expect these to be identical since one is based on the return of 3 month treasury bills and the other on 1 month treasury bills.