treasury bonds
Debt securities issued by the US government — considered the safest investment with interest exempt from state taxes.
Example
“Treasury bonds provided a guaranteed 4.8% yield with no state income tax on the interest.”
Memory Tip
TREASURY — backed by the US government. The safest fixed income investment available.
Why It Matters
Treasury bonds are important for personal finance because they offer a safe way to invest money while earning interest, making them ideal for conservative investors who prioritize security over high returns. Understanding treasury bonds helps you build a diversified investment portfolio and plan for retirement or long-term savings goals.
Common Misconception
Many people mistakenly believe that treasury bonds guarantee high returns or that they are completely risk-free in terms of losing money. While they are extremely safe from default risk, their value can fluctuate based on interest rate changes, and inflation can erode your purchasing power over time.
In Practice
Suppose you purchase a 10-year treasury bond for $10,000 with a 4 percent annual interest rate. You would receive $400 per year in interest payments, and after 10 years you get your original $10,000 back, having earned $4,000 in total interest while enjoying the security of knowing the US government backs your investment.
Etymology
From Latin 'thesaurus' meaning treasure — bonds backed by the full faith of the US Treasury.
Common Misspellings
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