TREASURY BOND
Back to GlossaryDefinition
A fixed-rate U.S. government debt securities with a maturity range between 10 and 30 years. It pays semiannual interest payments until maturity, when the face value of the bond is paid.
Summary
A Treasury Bond is a long-term debt security issued by the U.S. government with a maturity of 10-30 years. When you buy a Treasury Bond, you're essentially lending money to the federal government, which promises to pay you back the full amount (principal) at maturity plus regular interest payments (coupons) every six months. These bonds are considered among the safest investments because they're backed by the full faith and credit of the U.S. government, meaning there's virtually no risk of default.
Usage Context
Understanding Treasury bonds is crucial when studying government financing, risk-free assets in portfolio theory, interest rate benchmarks, bond valuation methods, and the relationship between monetary policy and bond markets. This knowledge is essential for topics covering fixed-income securities, capital markets, and macroeconomic policy.
Common Confusions
- Confusing Treasury bonds with corporate bonds or municipal bonds
- Not understanding that bond prices move inversely to interest rates
- Thinking Treasury bonds are completely without risk (they have interest rate risk and inflation risk)
- Confusing the coupon rate with the current yield
- Not realizing that Treasury bonds can be sold before maturity
- Mixing up the different Treasury securities by maturity length
