A U.S. Treasury bond is a long-term, fixed-rate loan to the federal government. Treasury bonds currently have 20- and 30-year terms; the rate is set at auction, and interest is paid every six months. You can hold a bond to maturity or sell it earlier, but its market price may be below what you paid or below its face value.
How do Treasury bonds work?
When you buy a Treasury bond, you lend money to the U.S. government. The Treasury issues the security electronically, sets its fixed coupon rate at auction, and pays interest twice a year. At maturity, the bond repays its face value. TreasuryDirect lists a $100 minimum purchase in $100 increments. TreasuryDirect’s Treasury Bonds page has current product details.
The coupon rate stays fixed for the life of the bond. The amount of interest you receive depends on the bond’s face value and coupon rate; the rate an investor earns if buying at a different price can differ from that coupon rate. Auction results and market prices change, so there is no single current yield that applies to every Treasury bond.
Treasury bonds are backed by the full faith and credit of the United States, but that does not make their market value or purchasing power constant. The distinction matters most if you might need to sell before maturity.
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How are Treasury bonds different from bills, notes, and other Treasuries?
“Treasury bond” refers to one specific kind of marketable Treasury security, not to every type of U.S. government debt.
| Security | Term or structure | Payment or principal behavior |
|---|---|---|
| Treasury bills | 4 to 52 weeks | Sold at face value or at a discount; pay face value at maturity. |
| Treasury notes | 2, 3, 5, 7, or 10 years | Pay interest every six months. |
| Treasury bonds | 20 or 30 years | Fixed rate set at auction; interest every six months. |
| Treasury Inflation-Protected Securities (TIPS) | 5, 10, or 30 years | Principal adjusts with the Consumer Price Index (CPI); interest is paid every six months. |
| Floating Rate Notes (FRNs) | 2 years | Interest changes with 13-week Treasury bill discount rates; payments are quarterly. |
| U.S. savings bonds | Nonmarketable | Registered to an individual; Series I savings bonds are inflation-indexed. |
These are structural differences, not a ranking. The relevant comparison is whether a security’s term, payment pattern, and access to cash fit your goal.
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How do I buy Treasury bonds?
Individuals can buy Treasury bonds at auction or in the secondary market. At auction, an individual can submit a noncompetitive bid: specify an amount, then accept the auction-determined return rather than choosing a yield. TreasuryDirect permits only noncompetitive bids through its platform. Competitive bidding is available through appropriate channels, but a bid can receive a partial award or no award if its terms are not accepted. The Treasury describes its process this way: “We sell U.S. Treasury marketable securities through auctions.” See TreasuryDirect’s auction explanation.
- Choose where to hold the bond. TreasuryDirect is a direct holding system. Alternatively, you can use a broker, dealer, or financial institution for a commercial book-entry holding.
- Check the current auction calendar or secondary-market offering. Bond terms and auction schedules can change; use the current Treasury information rather than relying on a remembered date or schedule.
- For an auction purchase through TreasuryDirect, submit a noncompetitive bid. Enter the amount you want to invest, subject to the current minimum and purchase increments. You do not enter a desired yield.
- Review the result and your account record. The auction determines the return for successful noncompetitive bids. If buying through a broker, review its order details and any service fees.
A broker can provide a different account location and transaction process; TreasuryDirect is a direct route. Compare convenience, how you manage or transfer the holding, how you would sell it, and any service charges rather than assuming one option is best for everyone. TreasuryDirect describes individual purchase routes and commercial book-entry holdings here.
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Can I sell a Treasury bond before maturity?
Yes. A marketable Treasury bond can be sold in the secondary market before it matures. Its sale price is set by the market, not guaranteed to equal face value. If you sell for less than you paid, you may realize a loss; if you sell for more, you may realize a gain.
What happens if interest rates rise?
When market rates rise, newly issued bonds may offer higher fixed payments than an older bond. The older bond’s price can fall to make its remaining payments more competitive to a buyer. A longer-term bond is exposed to price changes over a longer period than a short-term security, so selling early can matter even when the Treasury’s payment terms remain unchanged.
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What if I hold it to maturity?
If you hold the bond to maturity, the Treasury pays its face value at maturity and makes interest payments according to the bond’s terms. That does not protect the real purchasing power of those payments: inflation can reduce what fixed nominal dollars buy.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.What risks should I consider?
Treasury bonds have defined payment terms and U.S. government backing, but “risk-free” would be too broad a description. The SEC identifies interest-rate, inflation, and liquidity risks as relevant to bonds. For a Treasury bond, the practical questions are whether you can tolerate price movement if you sell early, whether fixed payments suit your inflation concerns, and whether you might need cash when a suitable buyer is not available. See the SEC’s bond risk overview.
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- Interest-rate risk: A rise in market rates can reduce the resale price of an existing fixed-rate bond.
- Inflation risk: Fixed payments can lose purchasing power as prices rise.
- Liquidity risk: You may not be able to sell exactly when you want, or at a price you consider acceptable.
How are Treasury bonds taxed?
TreasuryDirect says Treasury bond interest is subject to federal income tax each year and exempt from state and local income taxes. Your overall tax consequences depend on your circumstances, so consult current tax guidance or a qualified tax professional for advice about your situation. TreasuryDirect’s product page provides its tax description.
Are Treasury bonds the same as savings bonds?
No. Treasury bonds are marketable securities that can be sold in the secondary market. U.S. savings bonds are nonmarketable and have different ownership and redemption rules; Series I savings bonds also have an inflation-indexed structure. If transferability and the ability to sell in a market matter, the distinction is important. TreasuryDirect explains its savings bond products separately from marketable securities.
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