What Is A Treasury Bond? Bankrate Caret RightMain Menu Mortgage Mortgages Financing a home purchase Refinancing your existing loan Finding the right lender Additional Resources Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Bank Banking Compare Accounts Use calculators Get advice Bank reviews Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Credit Card Credit cards Compare by category Compare by credit needed Compare by issuer Get advice Looking for the perfect credit card? Narrow your search with CardMatch Caret RightMain Menu Loan Loans Personal Loans Student Loans Auto Loans Loan calculators Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Invest Investing Best of Brokerages and robo-advisors Learn the basics Additional resources Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Home Equity Home equity Get the best rates Lender reviews Use calculators Knowledge base Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Loan Home Improvement Real estate Selling a home Buying a home Finding the right agent Additional resources Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Insurance Insurance Car insurance Homeowners insurance Other insurance Company reviews Elevate your Bankrate experience Get insider access to our best financial tools and content Caret RightMain Menu Retirement Retirement Retirement plans & accounts Learn the basics Retirement calculators Additional resources Elevate your Bankrate experience Get insider access to our best financial tools and content Advertiser Disclosure

Advertiser Disclosure

We are an independent, advertising-supported comparison service. Our goal is to help you make smarter financial decisions by providing you with interactive tools and financial calculators, publishing original and objective content, by enabling you to conduct research and compare information for free - so that you can make financial decisions with confidence.
Our articles, interactive tools, and hypothetical examples contain information to help you conduct research but are not intended to serve as investment advice, and we cannot guarantee that this information is applicable or accurate to your personal circumstances. Any estimates based on past performance do not a guarantee future performance, and prior to making any investment you should discuss your specific investment needs or seek advice from a qualified professional.

How We Make Money

The offers that appear on this site are from companies that compensate us. This compensation may impact how and where products appear on this site, including, for example, the order in which they may appear within the listing categories. But this compensation does not influence the information we publish, or the reviews that you see on this site. We do not include the universe of companies or financial offers that may be available to you.

Editorial disclosure

All reviews are prepared by our staff. Opinions expressed are solely those of the reviewer and have not been reviewed or approved by any advertiser. The information, including any rates, terms and fees associated with financial products, presented in the review is accurate as of the date of publication. SHARE:

On This Page

larry1235/Shutterstock October 26, 2022 Checkmark Bankrate logo How is this page expert verified? At Bankrate, we take the accuracy of our content seriously. "Expert verified" means that our Financial Review Board thoroughly evaluated the article for accuracy and clarity. The Review Board comprises a panel of financial experts whose objective is to ensure that our content is always objective and balanced. Their reviews hold us accountable for publishing high-quality and trustworthy content. Brian O'Connell Brian O'Connell is a contributing personal finance writer for Bankrate.com. Brian Beers is the managing editor for the Wealth team at Bankrate. He oversees editorial coverage of banking, investing, the economy and all things money. Robert R. Johnson, Ph.D., CFA, CAIA, is a professor of finance at Creighton University and chairman and CEO of Economic Index Associates, LLC. Bankrate logo

The Bankrate promise

At Bankrate we strive to help you make smarter financial decisions. While we adhere to strict editorial integrity, this post may contain references to products from our partners. Here's an explanation for how we make money. Bankrate logo

The Bankrate promise

Founded in 1976, Bankrate has a long track record of helping people make smart financial choices. We’ve maintained this reputation for over four decades by demystifying the financial decision-making process and giving people confidence in which actions to take next. Bankrate follows a strict , so you can trust that we’re putting your interests first. All of our content is authored by and edited by , who ensure everything we publish is objective, accurate and trustworthy. Our investing reporters and editors focus on the points consumers care about most — how to get started, the best brokers, types of investment accounts, how to choose investments and more — so you can feel confident when investing your money. Investing disclosure: The investment information provided in this table is for informational and general educational purposes only and should not be construed as investment or financial advice. Bankrate does not offer advisory or brokerage services, nor does it provide individualized recommendations or personalized investment advice. Investment decisions should be based on an evaluation of your own personal financial situation, needs, risk tolerance and investment objectives. Investing involves risk including the potential loss of principal. Bankrate logo

Editorial integrity

Bankrate follows a strict , so you can trust that we’re putting your interests first. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions.

Key Principles

We value your trust. Our mission is to provide readers with accurate and unbiased information, and we have editorial standards in place to ensure that happens. Our editors and reporters thoroughly fact-check editorial content to ensure the information you’re reading is accurate. We maintain a firewall between our advertisers and our editorial team. Our editorial team does not receive direct compensation from our advertisers.

Editorial Independence

Bankrate’s editorial team writes on behalf of YOU – the reader. Our goal is to give you the best advice to help you make smart personal finance decisions. We follow strict guidelines to ensure that our editorial content is not influenced by advertisers. Our editorial team receives no direct compensation from advertisers, and our content is thoroughly fact-checked to ensure accuracy. So, whether you’re reading an article or a review, you can trust that you’re getting credible and dependable information. Bankrate logo

How we make money

You have money questions. Bankrate has answers. Our experts have been helping you master your money for over four decades. We continually strive to provide consumers with the expert advice and tools needed to succeed throughout life’s financial journey. Bankrate follows a strict , so you can trust that our content is honest and accurate. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. The content created by our editorial staff is objective, factual, and not influenced by our advertisers. We’re transparent about how we are able to bring quality content, competitive rates, and useful tools to you by explaining how we make money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for placement of sponsored products and, services, or by you clicking on certain links posted on our site. Therefore, this compensation may impact how, where and in what order products appear within listing categories. Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range can also impact how and where products appear on this site. While we strive to provide a wide range offers, Bankrate does not include information about every financial or credit product or service. A U.S. Treasury bond (often called a T-bond) is a fixed-interest debt security issued by the U.S. Treasury Department to raise funds to finance Uncle Sam’s spending requirements. Treasury securities vary based on the type of maturity: T-bonds: These come with original maturities of either 20 or 30 years and typically offer the highest interest rate for investors. Interest payments are made twice a year. T-notes: Original maturities for these securities range from two to 10 years and usually come with lower interest payments than a T-bond. T-note payments are also made twice a year. T-bills: These securities have the shortest time to maturity with lengths ranging from four weeks to one year. T-bills are sold at a discount to the face value of the bond, so investors earn the difference at maturity. So-called long-term Treasurys, which include the 30-year T-bond and the 10-year T-note, typically offer the highest interest rate payments of any security in the U.S. Treasury fixed-income family. The reason: Longer-term bonds normally have higher yields because they are riskier, as a spike in inflation could reduce the value of the interest payments. In addition, if market-driven yields move higher, pushing the price of the bond lower, it makes the lower-yielding bond you own a less attractive investment. (However, there are times when shorter-dated securities, such as a 3-month T-bill, can yield more than a 10-year note. This phenomenon, dubbed an inverted yield curve, occurred in March of 2019.)

How Treasury bonds are structured

Treasury bonds offer investors a basic investment structure, as follows: Treasury notes and bonds come with maturities of 10 to 30 years. Both a 10-year and 30-year Treasury hold a minimum face value amount of $1,000, although both are sold in $100 increments if purchased directly from the U.S. Treasury. Treasury securities are traded in a highly liquid secondary market, known as the fixed-income market (more commonly known as the bond market.) They can also be purchased directly at . Investors also can buy Treasury bonds through a bank or broker, but they will likely pay a fee or commission for doing so and may not be able to purchase T-bonds in the smaller $100 allotments offered by the government. The term “fixed income” means that Treasury bonds deliver a fixed interest rate payout, paid to investors twice annually, or every six months. In addition to the semiannual interest rate payments, bondholders eventually get all of their investment principal back. When a Treasury bond matures – meaning it has reached its maturity date and expires – the investor is paid out the full face value of the T-bond. That means if the bondholder holds a Treasury bond worth $10,000, he or she will receive the $10,000 principal back, as well as earning interest on the investment. Treasury bonds are liquid, meaning they can be sold by bondholders before they mature. Or, the bondholder can elect to hang on to the Treasury bond until the bond’s maturity date. Bonds, which tend to be less prone to big price swings than stocks, are a great way to keep investment portfolio assets in safety mode, an investment strategy known as capital preservation. Treasury bonds are widely considered a , as they have extremely low odds of default since they are backed fully by the U.S. government. Investors should understand that even U.S. government bonds have . That is, if market interest rates rise, the prices of these bonds will fall, as they have throughout 2022.

Treasury bond rates explained

The T-bond’s yield represents the return stemming from an investment in the bond, and is the interest rate the U.S. Treasury pays to an investor to borrow their money for a period of time. For instance, an investor who purchases a $10,000 T-bond and earns 4 percent in interest from Uncle Sam will earn a $400 annual return from the Treasury bond purchase. (also known as yield) are tied to the specific T-bond’s maturity date. “The average [original] maturity date on a Treasury bond is between 10 and 30 years,” says Jacob Dayan, CEO and co-founder of Community Tax, a financial and tax specialist firm in Chicago, Illinois. “Typically, the longer the maturity date, the higher the interest rate.” As of October 2022, yields on 30-year U.S. Treasury bonds were around 4.25 percent. That said, Treasury bond rates do rise and fall for a variety of reasons. “For example, if there is a high demand for longer maturity bonds, the T-bond interest rate could fall to (or below) the level of bonds with shorter maturity dates,” Dayan adds.

T-bond tax implications

Tax-wise, Treasury bonds are fairly straightforward. Any interest earned on a Treasury bond investment is tax-exempt at the state and local levels, but that interest is taxed by the federal government. If you hold your Treasury bond with the U.S. government, the amount of interest you earned is easily viewable on your IRS Tax Form 1099. If it’s with your bank or broker, your financial institution can provide your taxable interest earned on your T-bond investment.

How Treasury bonds fit into your portfolio

Above all else, it’s that safe haven feature that primarily creates high demand for Treasury notes and bonds. “U.S. Treasurys have provided safe haven, diversification and reliable income to generations of investors during most of their 90-year history,” says Craig G. Bolanos, Jr, a founding partner and CEO of Wealth Management Group, LLC, in Inverness, Illinois. “For many investors, U.S. Treasury bonds are the investment of choice for flight to safety (trades) as evidenced most prominently during periods of extreme market volatility.” Additionally, Treasurys offer several benefits within investment portfolios. “They serve as an important anchor for risk mitigation,” says Bolanos. Investors, however, won’t likely get wealthy from investing in T-bonds alone, but they can leverage T-bonds to preserve the wealth already created. “As an investment possibility, T-bonds are considered one of the safest investments you can make, since they’re backed by the U.S. government,” says Chase Lawson, author of “Financial Freedom: Breaking the Chains to Independence and Creating Massive Wealth.” “T-bonds don’t offer the highest return, as returns typically are around 2 percent to 5 percent, and require putting your money away long term,” says Lawson. “Still, there’s consistent income potential with Treasury bonds and your investment likely won’t decrease if the stock market tanks, like other investment vehicles can do.”

The difference between Treasury bonds and Treasury notes

Treasury bonds are part of a larger federal government family of Treasury securities, comprised of Treasury bonds, Treasury notes and Treasury bills. “Treasury notes and Treasury bonds are essentially the same type of instrument and only differ in original maturities,” explains Robert R. Johnson, professor of finance at the Heider College of Business, at Creighton University. “Technically, the government only issues Treasury bonds in original 20-to-30-year maturities and it issues Treasury notes in original maturities ranging as short as two years and no longer than 10 years.” Purchasers of Treasury bonds and notes receive an interest payment every six months, Johnson notes. Treasury bills (T-bills), the short-term debt of the government, differ from both Treasury bonds and Treasury notes. “T-bills are issued with original maturities of four, eight, 13, 26, and 52 weeks,” Johnson says. “They don’t pay interest and are issued on a discount basis (which means your initial cost is lower than the face value of the T-bill). With T-bills, the investor receives a higher amount when the bill matures than they paid to acquire it.”

Tips for investing in Treasury bonds

Here are a few easy ways to buy Treasurys: Buy direct. If possible, it’s preferable to buy Treasury bonds directly at TreasuryDirect.gov. That way, you’re buying your bonds directly from the federal government, thus eliminating the fees that come with buying bonds through a middleman, as you would with a brokerage firm. Buy closer to retirement. Wealth is more about capital appreciation during the savings and investing years and capital preservation during your later years — and with good reason. When you’re young, investing in higher-risk, but higher-reward stocks generate capital appreciation. In short, you’re creating long-term wealth with your stock investments. However, when you’re either nearing or already in retirement, you want to preserve the wealth you’ve created. You can accomplish that via capital preservation tools like T-bonds, which represent lower-risk investments that reduce your odds of losing money in a market downturn. Go the ETF route. An effective, low-cost way to get in on the Treasury bond game is to , or exchange traded funds. Any low-cost, diversified Treasury-oriented ETF that emphasizes a long-term T-bond component is worth looking at. You can even mix and match different Treasury security funds without having to pony up the $1,000 minimum needed to buy Treasury bonds from many banks and brokers. If you’re looking for ETFs that invest in long-term Treasurys, have a look at iShares 20+ Year Treasury Bond ETF (TLT) and Vanguard Long-Term Treasury ETF (VGLT). SHARE: Brian O'Connell Brian O'Connell is a contributing personal finance writer for Bankrate.com. Brian Beers is the managing editor for the Wealth team at Bankrate. He oversees editorial coverage of banking, investing, the economy and all things money. Robert R. Johnson, Ph.D., CFA, CAIA, is a professor of finance at Creighton University and chairman and CEO of Economic Index Associates, LLC.

Related Articles