Treasury bond
A long-term US government debt security with maturities of 10 to 30 years, considered one of the safest investments as it is backed by the full faith and credit of the US government.
Example
“Risk-averse investors often allocate a portion of their portfolios to Treasury bonds during periods of market uncertainty.”
Memory Tip
Treasury bond = issued by the US TREASURY. The government's IOU — the safest bond there is.
Why It Matters
Treasury bonds are important for personal finance because they provide a safe way to preserve wealth and generate predictable income over long periods. Understanding them helps investors balance their portfolios with low-risk investments that can protect against market volatility while still earning returns.
Common Misconception
Many people believe Treasury bonds guarantee you will make money, but they actually only guarantee you will get your principal back plus interest. If you sell before maturity when interest rates have risen, you will receive less than you paid for the bond.
In Practice
If you purchase a 10-year Treasury bond with a 4 percent annual interest rate for 10,000 dollars, you will receive 400 dollars in interest each year for 10 years, and then get your 10,000 dollars back at maturity. However, if interest rates rise to 5 percent after you buy it, new bonds become more attractive and your bond value drops if you need to sell it early.
Etymology
From Old French 'tresor' (treasure) — the US TREASURY issues these bonds.
Common Misspellings
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Related Terms
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See Also
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