# Treasury Bond: Overview of U.S. Backed Debt Securities

## What Is a Treasury Bond (T-Bond)?

Treasury bonds (T-bonds) are long-term, fixed-interest debt securities issued by the U.S. government with maturities of 20 or 30 years. They are regarded as low-risk investments due to their backing by the U.S. government's capability to tax, providing regular interest payments until maturity.

### Key Takeaways

*   Treasury bonds (T-bonds) are long-term, fixed-interest debt securities issued by the U.S. government with maturities of 20 or 30 years, providing semiannual interest payments.
*   Considered risk-free due to the backing of the U.S. government, T-bonds are often used by investors looking for stable, low-risk investment options to safeguard retirement savings or fund major life expenses.
*   T-bonds are sold through monthly U.S. Treasury auctions and are highly liquid, actively traded in the secondary market, with their prices influenced by auction interest rates.
*   The yield curve of Treasury bonds, typically upward-sloping, represents the relationship between yield and maturity, with an inverted curve potentially signaling an oncoming recession.
*   While safety is a key feature of T-bonds, they are subject to inflation and interest rate risks, which can impact their returns, making them more suitable for low-risk tolerance investors.

![Treasury Bond](https://www.investopedia.com/thmb/zQjH7-G2ZZ5OcbYa1IxFWCUaXTs=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/Treasurybond_final-95099ae62d8545ea96fcc30c23bf726a.png)

*— Investopedia / Michela Buttignol*

## The Basics of Treasury Bonds: Key Features and Functions

Treasury bonds (T-bonds) are one of four types of debt issued by the [U.S. Department of the Treasury](https://www.investopedia.com/terms/u/ustreasury.asp) 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)](https://www.investopedia.com/terms/t/tips.asp). These securities vary by [maturity](https://www.investopedia.com/terms/m/maturitydate.asp) 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](https://www.investopedia.com/terms/g/government-bond.asp), which can raise taxes to ensure 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 maturities of 20 to 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](https://www.investopedia.com/high-yield-interest-impact-on-taxes-8414834). 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. They can then be traded in the secondary market or bought through banks or brokers.

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.

## Important Considerations When Investing in Treasury Bonds

### Treasury Bond Maturity Periods: What You Need to Know

Treasury bonds are issued with maturities of 20 or 30 years. They are issued with a minimum [denomination](https://www.investopedia.com/terms/d/denomination.asp) of $100, and coupon payments on the bonds are paid semiannually. 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).

In a [competitive bid](https://www.investopedia.com/terms/c/competitivebid.asp), the bidder specifies the rate they want, and acceptance depends on its comparison to the bond's set rate. 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](https://www.investopedia.com/terms/s/secondarymarket.asp).

### Navigating 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. Prices go up when auction yields fall.

### Understanding Treasury Bond Yields and Their Impact

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](https://www.investopedia.com/terms/y/yieldcurve.asp) shows rates by maturity and usually slopes upward, with shorter terms having lower rates. 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 [Treasurydirect.gov](https://www.treasurydirect.gov/), create an account, and purchase your bonds directly from the government on the website.

## Are Treasury Bonds a Good Investment?

Whether Treasury bonds suit you depends on your investment needs. 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. They can be a good choice when the stock market is falling. 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)](https://www.investopedia.com/treasury-exchange-traded-funds-8536147) and mutual funds. The gilt is the United Kingdom's version of this security. It also trades through [gilt funds](https://www.investopedia.com/terms/g/giltfund.asp).

Treasury bonds are safe options when stock markets are unstable. 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.

> **Article Sources**
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> 1.  TreasuryDirect. “[Treasury Bonds](https://www.treasurydirect.gov/indiv/products/prod_tbonds_glance.htm).”
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> 2.  TreasuryDirect.gov. "[Treasury Marketable Securities](https://www.treasurydirect.gov/marketable-securities/)."
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> 3.  TreasuryDirect. “[How Treasury Auctions Work](https://www.treasurydirect.gov/instit/auctfund/work/work.htm).”
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> 4.  Fidelity. "[Search Secondary Offerings](https://www.fidelity.com/webcontent/ap002390-mlo-content/18.04/help/learn_bond_secondary_search.shtml)."
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