Treasury Bond [T-Bond]

Treasury Bonds (T-Bonds) are long-term U.S. government debt securities with maturities of 20 or 30 years, paying interest semi-annually at a fixed rate. For example, a 30-year bond with a 4% coupon and $10,000 face value pays $200 every six months for 30 years, then returns the $10,000 principal. T-Bonds are auctioned quarterly and can be purchased in $100 increments. Due to their long maturity, T-Bonds have high duration risk – their prices are very sensitive to interest rate changes. A 1% rate increase could cause a 30-year bond’s price to fall 20% or more. However, they offer higher yields than shorter-term Treasuries to compensate for this risk. T-Bonds are used by pension funds and insurance companies for long-term liability matching. The 30-year bond, called the ‘long bond,’ is a key benchmark for long-term interest rates. During flight-to-quality periods, T-Bond prices can surge despite their duration risk.