The treasury bond is a debt security issued by the United States government that is backed by the “full faith and credit” of the U.S. Treasury Department.
What Is a Treasury Bond?
Treasury bonds are issued by the U.S. Department of the Treasury to raise money for the federal government to meet its expenses. With a treasury bond, you lend money to the government for a set amount of time. In return, you receive semiannual interest payments until the bonds mature or are repurchased by the government at face value.
Buying and Selling Treasury Bonds
Treasury bonds do not trade on an exchange as stocks do. Instead, they are bought and sold directly on a secondary market. This means that an investor can buy or sell treasury bonds anytime the investor wishes, as opposed to stocks that trade on exchanges during specific hours of the day.
You can buy treasury bonds via an online auction that’s held by the Treasury Department.
You can either hold the bond until its maturity and receive interest after every six months or sell it before it matures. If you are looking to sell treasury bonds, it is best to do this through a broker in the secondary market. When selling before maturity, the seller may receive a lower amount than the investment made initially.
Advantages of Treasury Bonds
Treasury bonds are highly regarded and generally dependable investments. They offer a consistent interest rate and are backed by the government. The government doesn’t guarantee that it will always be able to pay its debts in full, but it’s rare for the federal government to default on its obligations.
It’s one of the most certain ways to establish a steady stream of income. Treasury bonds pay semiannual interest until they mature.
Treasury bonds can be sold anytime in the secondary market, meaning there’s so much liquidity to them.
Disadvantages of Treasury Bonds
Treasury bonds are known to be a very safe investment, but they do have some disadvantages that range from low-interest rates to lower prices when sold before maturity.
The interest payments on treasury bonds provide an income stream, but they may not be enough to keep pace with inflation or other forms of investment income.
Keep in mind that treasury bonds, like any other investment, have risks or drawbacks associated with them. Make sure to understand them properly and make an informed decision.