Treasury Bond
A Treasury bond (T-bond) is a long-term U.S. government debt security with a maturity of 20 or 30 years that pays semi-annual interest (coupon payments) and returns the principal at maturity.
Treasury bonds are the longest-duration debt instruments issued by the U.S. Department of the Treasury. Along with Treasury notes (2–10 year maturities) and Treasury bills (under 1 year), T-bonds form the core of the $27 trillion-plus U.S. government debt market — the largest and most liquid sovereign bond market in the world. They are auctioned by the Treasury on a monthly schedule, with the 30-year bond typically drawing the highest scrutiny from investors and analysts.
The 10-year Treasury yield — technically a note, not a bond, but often loosely called a 'Treasury bond yield' — is arguably the single most important benchmark interest rate in global finance. It serves as the reference rate for 30-year mortgage pricing, corporate bond spreads, stock market valuations, and exchange rates. When the 10-year yield rises, borrowing costs increase across the economy; when it falls, financial conditions ease.
T-bond prices and yields move inversely. When new bonds are issued at higher rates, existing bonds with lower coupons fall in price to compete. This inverse relationship was painfully illustrated in 2022, when the Federal Reserve's aggressive rate-hiking campaign caused the Bloomberg U.S. Aggregate Bond Index to fall roughly 13% — its worst calendar-year loss since at least 1926. Long-dated 20- and 30-year Treasuries suffered even steeper losses, exceeding 25%, rivaling equity bear-market declines.
Despite this interest-rate risk, T-bonds remain foundational to institutional portfolios. Pension funds, insurance companies, and foreign central banks — particularly China and Japan, which each hold over $1 trillion — need long-dated, high-quality assets to match long-term liabilities. In a recessionary environment, T-bonds typically rally as investors anticipate rate cuts, providing a portfolio hedge that partially offsets stock-market losses.
Interest income from Treasury bonds is exempt from state and local taxes but subject to federal income tax. Investors can purchase T-bonds through TreasuryDirect.gov or through brokerages in the secondary market.