What is a Treasury Bond?
How Does a Treasury Bond Work?
T-Bonds are backed by the full faith and credit of the U.S. government. For this reason, T-Bonds are generally considered risk-free investments. Due to their lack of default risk and extremely high level of liquidity, Treasuries usually offer the lowest yields of bonds with similar maturities and are considered benchmarks of the fixed income asset class.
Institutional investors make up most of the market for Treasuries, but individual investors can easily purchase T-Bonds. Investors interested in purchasing Treasuries can do so directly from the Treasury or through banks and brokers.
Income from Treasuries is federally taxable but generally exempt from most state and local taxes. This means that for some investors, particularly those who live in states with high taxes, Treasuries may return slightly more than taxable securities with higher coupons.
Why Does a Treasury Bond Matter?
For investors, Treasury bonds are widely regarded as the safest of investments. T-Bonds are especially attractive for those primarily interested in preserving capital or maintaining a consistent stream of income. But investors should be aware that due to Treasuries' low interest rates, inflation can be particularly eroding to real returns.
Personalized Financial Plans for an Uncertain Market
In today’s uncertain market, investors are looking for answers to help them grow and protect their savings. So we partnered with Vanguard Advisers -- one of the most trusted names in finance -- to offer you a financial plan built to withstand a variety of market and economic conditions. A Vanguard advisor will craft your customized plan and then manage your savings, giving you more confidence to help you meet your goals. Click here to get started.
Read This Next
There are few places investors can turn to for a guaranteed return. The very idea of a no-risk return sounds almost mythical in this era of volatility and uncertainty. Stocks and...Read More →
When a person asks you, "How did the market do today?" it's safe to assume that he or she is looking for a quote on the most...Read More →
The term tape reading originally referred to actual reading of the old style ticker tapes that traders used to get their ...Read More →
What's the biggest mistake investors make? Analyzing a company's prospects without paying any attention to the bigger picture. With that in mind, here's how to assess the big...Read More →