A Treasury bond is 20- or 30-year marketable U.S. government debt with a fixed rate and semiannual interest payments.
A Treasury bond (T-bond) is a long-term, marketable debt security issued by the U.S. Treasury. Treasury currently issues bonds with 20- or 30-year terms. The coupon rate is fixed at auction, interest is paid every six months, and face value is returned at maturity if the bond remains outstanding and is held to that date.
A Treasury bond is not a U.S. savings bond. Treasury bonds can be sold in the secondary market before maturity. Savings bonds are nonmarketable retail securities with different interest, tax, ownership, and redemption rules.
Treasury sells bonds through auctions. Noncompetitive bidders agree to accept the auction result. Competitive bidders specify a yield, and their bids may be accepted in full, accepted in part, or rejected under the auction rules.
TreasuryDirect currently lists a $100 minimum and $100 increments. It also lists four original-issue bond auctions and eight reopenings per year. A reopening sells an additional amount of an existing bond with the same CUSIP, coupon, and maturity date. The buyer may owe accrued interest when the issue date follows the dated date.
A holder can keep the bond until maturity or sell through a bank, broker, or dealer. TreasuryDirect does not provide a direct secondary-market selling function; securities held there generally must be transferred to an intermediary before sale.
A bond’s annual coupon equals face value multiplied by its coupon rate. A $10,000 bond with a 4.00% coupon pays $400 per year, normally in two $200 installments. Those dollar coupons do not change merely because the bond’s market price changes.
| Market relationship | Typical clean price | Investor implication |
|---|---|---|
| Required yield above coupon rate | Below par | Discount helps raise yield toward the market rate |
| Required yield near coupon rate | Near par | Coupon and market return are similar |
| Required yield below coupon rate | Above par | Premium reduces yield relative to the coupon rate |
The quoted clean price generally excludes accrued interest. Settlement cash, or dirty price, includes accrued interest and can differ from the quoted amount. Yield to maturity incorporates price, remaining coupons, maturity value, and time under stated assumptions. Current yield considers only annual coupon divided by price and is therefore incomplete.
Duration summarizes how strongly a bond’s price may respond to a change in yield. Treasury bonds usually have more duration than short Treasury securities because much of their value arrives many years in the future. Lower coupons also tend to increase duration because less value is returned early.
Convexity means the price-yield relationship is curved rather than linear. Duration is useful for a small-change estimate, but the error grows as the yield change becomes larger.
Assume a 30-year Treasury bond has $10,000 face value, a 4.00% coupon, and an estimated modified duration of 14. Its scheduled coupon is $200 every six months.
If its market yield rises by 0.50 percentage point, a duration-only estimate is:
Estimated price change = -14 x 0.005 = -7.0%
On a market value near $10,000, that is an approximate decline of $700. The estimate is not a forecast and excludes convexity, accrued interest, coupon cash flows during the period, transaction costs, and changes in the yield curve. The actual price change must be calculated from the bond’s exact cash flows and settlement date.
If the holder does not sell and Treasury makes the scheduled payments, the market decline does not change the stated coupons or face value due at maturity. It still matters economically because the investor has less liquidity at the original value and has forgone the opportunity to buy at the newer, higher yield.
| Security | Current term or structure | Payment pattern | Primary distinction |
|---|---|---|---|
| Treasury bond | 20 or 30 years | Fixed interest every six months | Long nominal duration |
| Treasury note | 2, 3, 5, 7, or 10 years | Fixed interest every six months | Intermediate maturity |
| Treasury bill | 4 to 52 weeks on regular schedules | Face value at maturity; no coupon | Short-term cash instrument |
| TIPS | 5, 10, or 30 years | Semiannual interest on inflation-adjusted principal | Principal linked to CPI changes |
| U.S. savings bond | Series-specific retail structure | Series-specific | Nonmarketable and subject to redemption rules |
Eligible Treasury bonds can also be separated into independently traded interest and principal components through the STRIPS program. A stripped principal payment has no interim coupon and can be highly sensitive to yield changes because all of its cash flow arrives at maturity.
This article is educational and does not recommend a bond, maturity, account, or trading strategy. Long-term securities can produce large market-value changes and should be evaluated in the context of cash needs and risk capacity.