Treasury Bond

Beginner

A Treasury bond is a long-term debt security issued by the US government, with a maturity of more than ten years, typically twenty or thirty years, that pays interest every six months.

Treasury bonds are the longest-dated regular debt issued by the US government. They pay a fixed coupon twice a year and repay their face value at maturity.

Because they are backed by the US government, Treasury bonds have very low default risk. Their long maturities, however, make their prices very sensitive to changes in interest rates. If market rates rise by one percentage point, the price of a 30-year bond can fall significantly, much more than a two-year note would.

Long-term investors, such as pension funds and insurance companies, use Treasury bonds to match long-term obligations, such as pensions that must be paid decades from now.

For example, a 30-year Treasury bond with a face value of 1,000 and a 4.5% coupon pays 22.50 every six months for 30 years, then repays 1,000.

The term "Treasury bond" is sometimes used loosely to mean any US government debt security, but strictly it refers to these long-term securities.

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