What’s a Treasury bond?

T-bonds are U.S. Treasury bonds. They pay a fixed interest rate and are low-risk securities. You are basically making a loan to government and the government will pay you back with interest.

These are some basic information about Treasury bonds:

  • They are available in either 20- or 30-year terms.

  • These can be bought in increments of $100.

  • Treasury bonds earn interest semi-annually (every six month) until the end.

  • These investments are low-risk and long-term, and they’re guaranteed by the U.S. government.

Current rates for bonds of 20- and 30 year durations are 4%. They will be updated in February 2023.

Where can I buy a Treasury bond

T-bonds can be purchased directly from the U.S. Government. However, the best way to add them to your portfolio is through mutual funds and Treasury exchange-traded funds.

A broker or bank

You can buy bulk government bonds on a brokerage platform using mutual funds or exchange-traded funds. An exchange-traded funds, or ETF for short, is a collection of investments, such as stocks and bonds, from which you can purchase as many or as little shares as you wish. Treasury ETFs invest only in U.S. Treasury securities and can be purchased and sold just like any other ETF. Mutual funds, like ETFs are another way for investors to pool their resources to gain exposure to many securities without the need to buy or manage them.

Nicholas Juhle is a certified financial analyst at Greenleaf Trust and chief investment officer. ETFs are mutual funds that allow you to have a variety of Treasury bonds at different maturity times, and have them managed for your convenience.

“There is a system. He says that when the bonds mature, they will roll it back into new Treasurys.

Juhle suggests looking at the prospectus to find out what an ETF or mutual fund contains.

Juhle states that each mutual fund or ETF will have a prospectus which explains exactly what can be held. This might be, for example, whether the fund holds 80% or 100% T-bonds.

Directly through the TreasuryDirect website

You can bypass brokers and purchase direct from the government by having these three pieces of information available: A taxpayer identification number (or Social Security number), a U.S. postal address, and a checking/savings account to link to payment.

To get started:

  1. Select the type of account that you want: individual, business, or organizational, or estate or trust account.

  2. Personal information such as a taxpayer identification number (or TIN), a U.S. postal address, and a bank account.

  3. To open a TreasuryDirect account, create a username and password.

  4. After your account has been verified, you can open it and click on the Buy Direct tab.

  5. Please specify the security that you would like — in this instance, Treasury bonds — as well as the amount you wish to purchase.

  6. Choose to buy.

The yield is automatically deposited in your account when the bond matures.

Key Terms for Treasury Bonds

Examples and definitions

Annual coupon payment

Total investment interest payments over the period of one year.

Coupon payment frequency

How often interest payments are made. T-bond coupon payments are made every six months until maturity.

Discount price

If the bond’s face value falls below its price, it will be repurchased at the current market price.

Face value

If the bond is held until maturity, it will be worth its price.

Interest Rate

A lender’s charge to a borrower for money. As of November 2022, the interest rate on T-bonds was 4 %.

How much investors will pay to buy a Treasury bond?

Years to maturity

T-bonds mature in 20-30 years.

Yield to maturity

Total investment return for bonds held until maturity.

Questions frequently asked

Is it the same thing with savings bonds as Treasury bonds?

Treasury bonds are different from U.S. Treasury bonds. Savings bonds are not the same as U.S. Treasury bonds. Both are U.S. debt securities. A savings bond, however, is a different type loan to the U.S. government. It comes in two series: I or EE. Savings bonds are not able to be sold or bought on secondary markets, unlike Treasury bonds.

What are the differences between Treasury bonds, bills, and notes?

Although often confused with Treasury bonds, Treasury bills and Treasury notes are short-term U.S. government securities. Treasury bills mature in 4 to 6 weeks, while Treasury notes can last up to 10 years.

How do I sell my Treasury Bond?

A brokerage or bank is the best way to trade Treasury bonds before their maturity date. TreasuryDirect bonds cannot be traded through a brokerage, bank or dealer. T-bonds can be sold to investors who are looking to purchase them.

Are my bonds required to be held for 20 or 30 years?

Not necessarily. You can sell your bond in the bond market early if you purchased it from TreasuryDirect as long as you have held it for at most 45 days. This rule doesn’t apply to T-bonds purchased on the secondary market.