Treasury Bond: Overview of U.S. Backed Debt Securities (2024)

What Is a Treasury Bond (T-Bond)?

Treasury bonds (T-bonds) are government debt securities issued by the U.S. Federal government that have maturities of 20 or 30 years. T-bonds earn periodic interest until maturity, at which point the owner is also paid a par amount equal to the principal.

Treasury bonds are part of the larger category of U.S. sovereign debt known collectively as Treasuries, which are typically regarded as virtually risk-free since they are backed by the U.S. government's ability to tax its citizens.

Key Takeaways

  • Treasury bonds (T-bonds) are fixed-rate U.S. government debt securities with a maturity of 20 or 30 years.
  • T-bonds pay semiannual interest payments until maturity, at which point the face value of the bond is paid to the owner.
  • Along with Treasury bills, Treasury notes, and Treasury Inflation-Protected Securities (TIPS), Treasury bonds are one of four virtually risk-free government-issued securities.

Understanding Treasury Bonds (T-Bonds)

Treasury bonds (T-bonds) are one of four types of debt issued by the U.S. Department of the Treasury to finance the U.S. government’s spending activities. The four types of debt are Treasury bills, Treasury notes, Treasury bonds, and Treasury Inflation-Protected Securities (TIPS). These securities vary by maturity and coupon payments.

All of them are considered benchmarks to their comparable fixed-income categories because they are virtually risk-free. T-bonds are backed by the U.S. government, and the U.S. government can raise taxes and increase revenue to ensure full payments.

These investments are also considered benchmarks in their respective fixed-income categories because they offer a base risk-free rate of investment with the categories' lowest return. T-bonds have long durations, issued with maturities of 20 and 30 years.

As is true for other government bonds, T-bonds make interest payments semiannually, and the income received is only taxed at the federal level. Treasury bonds are issued at monthly online auctions held directly by the U.S. Treasury. A bond's price and its yield are determined during the auction. After that, T-bonds are traded actively in the secondary market and can be purchased through a bank or broker.

Individual investors often use T-bonds to keep a portion of their retirement savings risk-free, to provide a steady income in retirement, or to set aside savings for a child's education or other major expenses. Investors must hold their T-bonds for a minimum of 45 days before they can be sold on the secondary market.

Treasury Bond Considerations

Treasury Bond Maturity Ranges

Treasury bonds are issued with maturities of 20 or 30 years. They are issued with a minimum denomination of $100, and coupon payments on the bonds are paid semi-annually. The bonds are initially sold through an auction; the maximum purchase amount is $5 million if the bid is non-competitive (or 35% of the offering if the bid is competitive).

A competitive bid states the rate the bidder is willing to accept; it is accepted depending on how it compares with the set rate of the bond. A non-competitive bid ensures the bidder gets the bond, but they have to accept the set rate. After the auction, the bonds can be sold in the secondary market.

The Treasury Bond Secondary Market

There is an active secondary market for T-bonds, making the investments highly liquid. The secondary market also makes the price of T-bonds fluctuate considerably in the trading market. As such, current auction and yield rates of T-bonds dictate their pricing levels on the secondary market.

Similar to other types of bonds, T-bonds on the secondary market see prices go down when auction rates increase because the value of the bond’s future cash flows is discounted at a higher rate. Inversely, when prices increase, auction rate yields decrease.

Treasury Bond Yields

In the fixed-income market, T-bond yields help to form the yield curve, which includes the full range of investments offered by the U.S. government. The yield curve diagrams yield by maturity, and it is most often upward-sloping (with lower maturities offering lower rates than longer-dated maturities). However, the yield curve can become inverted when long-term rates are lower than short-term rates. An inverted yield curve can signal an upcoming recession.

What Are the Types of Treasuries?

There are three main types of U.S. Treasuries: bonds, notes, and bills. Bills mature in less than a year, notes in two to five years, and bonds in 20 or 30 years. All are backed by the full faith of the U.S. government.

How Do You Buy T-Bonds?

To buy T-bonds, you can head to, create an account, and purchase your bonds directly from the government on the website.

Are Treasury Bonds a Good Investment?

Whether Treasury bonds are a good investment will depend on the specific investor. Treasury bonds are considered risk-free assets, so investors with a low risk tolerance would find these assets suitable; however, because of their safety, they pay a low interest rate, limiting returns. These can be good options in a declining equities market for some investors. Additionally, though they are risk-free, Treasury bonds are susceptible to inflation risk and interest-rate risk, which could reduce the returns for an investor.

The Bottom Line

Treasury bonds are part of the collective of U.S. Treasuries. They are low-risk assets that investors can choose when looking for safe but low returns. You can invest in Treasury bonds through exchange traded funds (ETFs) and mutual funds. The gilt is the United Kingdom's version of this security. It also trades through gilt funds.

Treasury bonds are also a good option for investors seeking a haven from volatile equity markets. Because Treasury bonds are backed by the full faith of the U.S. government, which has the largest and one of the most stable economies in the world, they are considered risk-free investments.

Treasury Bond: Overview of U.S. Backed Debt Securities (2024)


Treasury Bond: Overview of U.S. Backed Debt Securities? ›

Treasury bonds (T-bonds) are government debt securities issued by the U.S. Federal government that have maturities of 20 or 30 years. T-bonds earn periodic interest until maturity, at which point the owner is also paid a par amount equal to the principal.

What are the four main types of Treasury bonds? ›

The types of Treasury bonds include Treasury bills, Treasury notes, Treasury Inflation-Protected Securities (TIPS), and Floating-rate notes (FRNs). The different types of Treasury bonds differ in maturity dates, interest payments, and where they are sold.

Is there a difference between US Treasury bills and US Treasury bonds? ›

Key takeaways

Treasury bills have short-term maturities and pay interest at maturity. Treasury notes have mid-range maturities and pay interest every 6 months. Treasury bonds have long maturities and pay interest every 6 months.

What are US Treasuries backed by? ›

The federal government finances its operation in part by selling various types of securities. All these securities are backed by the full faith and credit of the United States government.

Are US treasury bonds a good investment? ›

While Treasury bonds don't have a serious risk that the government won't pay you back, they do have two other risks that are typical of bonds: inflation risk and interest rate risk. While Treasury bonds are relatively safe investments, one key risk is that inflation will erode your returns over the years.

What happens to treasury bonds when interest rates rise? ›

A fundamental principle of bond investing is that market interest rates and bond prices generally move in opposite directions. When market interest rates rise, prices of fixed-rate bonds fall. this phenomenon is known as interest rate risk.

Are treasury bonds risk free? ›

Treasury bonds are widely considered a risk-free investment because the U.S. government has never defaulted on its debt. However, investors should understand that even U.S. government bonds have interest rate risk. That is, if market interest rates rise, the prices of these bonds will fall, as they did throughout 2022.

What is the downside of US Treasury bonds? ›

But while they are lauded for their security and reliability, potential drawbacks such as interest rate risk, low returns and inflation risk must be carefully considered. If you're interested in investing in Treasury bonds or have other questions about your portfolio, consider speaking with a financial advisor.

Which is safer Treasury bills or Treasury bonds? ›

If you're looking for a short-term investment with low risk, Treasury bills are a great choice. However, if you're looking for a longer-term investment that yields semiannual income with a consistent interest rate, buying Treasury bonds is likely the better choice.

What are the pros and cons of Treasury bonds? ›

Consistent Income: For investors seeking a steady income during retirement, long-term treasuries, such as Treasury notes and bonds, offer regular interest payments. Cons: Interest Rate Risk: Long-term treasuries are more sensitive to changes in interest rates than short-term ones.

What are the risks with US Treasuries? ›

The dangers lie in three areas: inflation, interest rate risk, and opportunity costs.

Who are the top owners of the US Treasuries? ›

The three largest holders of Treasuries -- Japan, China and the UK -- led the purchase U.S. government debt. Japanese investors raised their stash of Treasuries to $1.138 trillion in December, from $1.127 trillion in November, data showed. Their holdings were the largest since August 2022.

Who owns most of the US Treasuries? ›

Nearly half of all US foreign-owned debt comes from five countries. All values are adjusted to 2023 dollars. As of January 2023, the five countries owning the most US debt are Japan ($1.1 trillion), China ($859 billion), the United Kingdom ($668 billion), Belgium ($331 billion), and Luxembourg ($318 billion).

What is one downside to investing in treasuries? ›

Drawbacks of Investing in Treasury Bills

The biggest downside of investing in T-bills is that you're going to get a lower rate of return compared to other investments, such as certificates of deposit, money market funds, corporate bonds or stocks.

Is it better to buy treasuries or CDs? ›

While Treasurys boast higher rates than CDs, you can still score a generous annual percentage yield (APY) on a CD by shopping around. Typically, online banks offer higher interest rates than brick-and-mortar ones. Some of the best CDs have APYs that top 5%.

Do you pay taxes on Treasury bonds? ›

Interest from Treasuries is generally taxable at the federal level, but not at the state level. Interest from munis is generally exempt from federal taxes, and if you live in the state where the bond was issued, the interest may also be exempt from state taxes.

What are the 5 main types of bonds? ›

There are five main types of bonds: Treasury, savings, agency, municipal, and corporate. Each type of bond has its own sellers, purposes, buyers, and levels of risk vs. return. If you want to take advantage of bonds, you can also buy securities that are based on bonds, such as bond mutual funds.

What are the different types of Treasuries? ›

Treasury bonds, notes and bills are three different types of U.S. debt securities. They vary in their length to maturity (the time it takes to receive the face value) and the interest rates they pay.

What are the three types of Treasuries? ›

These are Treasury Bills, Treasury Bonds, and Treasury Notes.


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