Treasury Bonds and Their Advantages for Investors


A Treasury bond is simply a long-term security issued by the US Treasury that features a 30-year, fixed maturity and requires a minimum investment of $100. Treasury bonds belong under the umbrella of US Treasury securities, which include:

close up shot of a paper with Treasury bonds written on it

·         T-bonds
·         US Treasury notes
·         Treasury securities
·         Government bonds

The Department of the Treasury gives these securities to raise money that the federal government uses to run its operations.

Advantages of Treasury Bonds

Putting your money into Treasury Bonds gives you a lot of benefits. Aside from having no maintenance fees, Treasury bonds also feature:

·         Guaranteed rate of return
·         No value loss
·         Tax exemptions
·         Good for retirement

Tax Benefits

Both the state and federal bonds offer potential tax savings. The interest on federal bonds is exempt from state and local taxes. Municipal bonds, on the other hand, are usually not subject federal taxes and, in some cases, they are also exempted from state and local income taxes as well.

On the other hand, some municipal bonds may be taxed if you’re hit with the alternative minimum tax, so you should check your municipal bond would be affected before you buy.


Federal bonds are supported by the US government, which is almost certainly one of the safest investments out there. Also, many municipal bonds are insured so that even if the municipality defaults, your principal and interests are safe.

Other investments like stocks or corporate bonds do not have the same level of security. If the company goes bankrupt, you could lose all of your investments.


Government bonds can be bought and sold just like many other investments, like stocks and corporate bonds. For instance, if the bond won’t mature for another five years but you need cash now, you can sell the bond to another investor and get your money back.

On the other hand, because of the changing market conditions, you could find yourself taking a loss to unload the bond. Meanwhile, based on the situations, you might also be able to make a gain.

Fixed Rates

When you have fixed rate on your government bonds, you are allowed to budget how much income you’ll have to spend as you receive payments. Also, if interest rates fall, your rate is locked in so you earn a higher rate than the market is paying.

There’s also always the possibility that interest rates could go up. If such things happen, having a fixed rate would be bad news because you’re stuck with the lower rate.

Disadvantages of Treasury Bonds

Some of the disadvantages include:

·         Long-term investment – you might have to wait up to 30 years before the bond matures.

·         Restrictions and penalties – restrictions and penalties might be associated with redeeming T-bonds before they mature.

·         Tax liability – although you don’t have to pay state or local taxes on the interest your bond generate, the interest is under to federal income tax.

·         Buying limits – if you buy your bonds through an auction, you can buy up to 35 percent of the initial offering amount.

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