U.S. Treasury Bond
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A U.S. Treasury Bond is a U.S. Treasury security that is a government bond with a long-term maturity (typically twenty to thirty year maturity) and pays a fixed interest rate (known as the U.S. Treasury bond interest rate) to bondholders.
- AKA: United States Government Bond, T-Bond, Long Bond.
- Context:
- It can typically serve as a Long-Term Government Financing Instrument through extended maturity periods that range from twenty years to thirty years.
- It can typically provide Fixed Periodic Interest Payments through semi-annual coupon payments to u.s. treasury bond holders.
- It can typically offer Tax Advantage Benefits through state and local tax exemptions on interest earned while remaining subject to federal income tax.
- It can typically function as a Long-Term Interest Rate Benchmark for various financial markets and lending products.
- It can typically be issued through quarterly auctions conducted by the U.S. Treasury Department.
- It can typically be traded in the secondary market with high liquidity levels allowing for price discovery and efficient trading.
- It can typically serve as a Safe Long-Term Investment Vehicle for institutional investors such as pension funds and insurance companies seeking to match long-term liability.
- ...
- It can often correlate with long-term mortgage rates, particularly the 30-year fixed mortgage rate which has historically maintained a tight correlation with u.s. treasury bond yields.
- It can often be used as a portfolio diversification tool during economic uncertainty periods due to its negative correlation with equity markets.
- It can often function as an economic indicator where falling yields may signal economic slowdown expectations and rising yields may indicate inflation concerns.
- It can often be suspended from issuance during periods of government budget surpluses, as occurred between February 2002 and February 2006.
- ...
- It can range from being a Recently Issued U.S. Treasury Bond to being an Off-the-Run U.S. Treasury Bond, depending on its issuance recency.
- It can range from being a Low-Yield U.S. Treasury Bond to being a High-Yield U.S. Treasury Bond, depending on its interest rate environment at issuance time.
- It can range from being a Premium-Priced U.S. Treasury Bond to being a Discount-Priced U.S. Treasury Bond, depending on its current market price relative to face value.
- It can range from being a Liquid U.S. Treasury Bond to being a Less-Liquid U.S. Treasury Bond, depending on its trading volume and market participant interest.
- ...
- It can be a member of a U.S. Treasury Bond Population that represents the total outstanding u.s. treasury bonds in circulation.
- It can be tracked by a U.S. Treasury Bond Index, such as the Bloomberg U.S. Treasury Bond Index.
- It can influence global financial markets through its yield movements and sovereign debt comparisons.
- It can be held by foreign governments as part of their foreign exchange reserves and investment portfolios.
- It can affect domestic monetary policy through its yield curve relationship with shorter-term u.s. treasury securitys.
- ...
- Examples:
- U.S. Treasury Bond Maturity Types, such as:
- U.S. Treasury Bond Holder Types, such as:
- Domestic Institutional U.S. Treasury Bond Holders, such as:
- Foreign Government U.S. Treasury Bond Holders, such as:
- Chinese Government U.S. Treasury Bond Holding of $1.27 trillion as of December 2014.
- Japanese Government U.S. Treasury Bond Holding of $1.18 trillion as of December 2014.
- Individual U.S. Treasury Bond Holders investing for retirement planning and wealth preservation.
- U.S. Treasury Bond Trading Environments, such as:
- U.S. Treasury Bond Historical Periods, such as:
- 1950s High-Stability U.S. Treasury Bond Period with relatively stable yields.
- 1970-1980s Rising-Yield U.S. Treasury Bond Period during high inflation era.
- 1980-2000s Declining-Yield U.S. Treasury Bond Period during disinflation era.
- 2002-2006 U.S. Treasury Bond Suspension Period during federal budget surplus time.
- 2006-Present U.S. Treasury Bond Reintroduction Period responding to global demand and yield curve management.
- ...
- Counter-Examples:
- U.S. Treasury Bill, which has a maturity period of one year or less with no periodic interest payments.
- U.S. Treasury Note, which has a medium-term maturity ranging from two years to ten years.
- U.S. Treasury Inflation-Protected Security, which provides principal protection against inflation through CPI adjustments.
- U.S. Municipal Bond, which is issued by state governments or local governments rather than the federal government.
- Foreign Government Bond, such as a Canada Bond, Japan Bond, or Greek Bond, which are issued by non-U.S. governments.
- U.S. Corporate Bond, which is issued by corporations rather than the government and carries higher default risk.
- See: U.S. Economy, Maturity (Finance), Coupon (Bond), Secondary Market, Pension Fund, Institutional Investor, Yield Curve, National Debt, Federal Budget, Fixed Income Investment, Government Bond Market.
References
2014
- (Wikipedia, 2014) ⇒ http://en.wikipedia.org/wiki/United_States_Treasury_security#Treasury_bond Retrieved:2014-3-14.
- Treasury bonds (T-Bonds, or the long bond) have the longest maturity, from twenty years to thirty years. They have a coupon payment every six months like T-Notes, and are commonly issued with maturity of thirty years. The secondary market is highly liquid, so the yield on the most recent T-Bond offering was commonly used as a proxy for long-term interest rates in general.[citation needed] This role has largely been taken over by the 10-year note, as the size and frequency of long-term bond issues declined significantly in the 1990s and early 2000s.[citation needed]
The U.S. Federal government suspended issuing 30-year Treasury bonds for four years from February 18, 2002 to February 9, 2006.[1] As the U.S. government used budget surpluses to pay down Federal debt in the late 1990s,[2] the 10-year Treasury note began to replace the 30-year Treasury bond as the general, most-followed metric of the U.S. bond market. However, because of demand from pension funds and large, long-term institutional investors, along with a need to diversify the Treasury's liabilities - and also because the flatter yield curve meant that the opportunity cost of selling long-dated debt had dropped - the 30-year Treasury bond was re-introduced in February 2006 and is now issued quarterly. This brought the U.S. in line with Japan and European governments issuing longer-dated maturities amid growing global demand from pension funds.[citation needed] Since the 1970s the 10 Year Treasury Note and the 30 year fixed mortgage have had a very tight correlation.[3]
- Treasury bonds (T-Bonds, or the long bond) have the longest maturity, from twenty years to thirty years. They have a coupon payment every six months like T-Notes, and are commonly issued with maturity of thirty years. The secondary market is highly liquid, so the yield on the most recent T-Bond offering was commonly used as a proxy for long-term interest rates in general.[citation needed] This role has largely been taken over by the 10-year note, as the size and frequency of long-term bond issues declined significantly in the 1990s and early 2000s.[citation needed]
- ↑ "Treasury Reintroduces 30-Year Bond". U.S. Federal Reserve. 13 April 2011. http://www.federalreserve.gov/releases/h15/data.htm. Retrieved 2012-08-22.
- ↑ "The United States on Track to Pay Off the Debt by End of the Decade". Clinton4nara.gov. 28 December 2000. http://clinton4.nara.gov/WH/new/html/Fri_Dec_29_151111_2000.html. Retrieved 2009-10-23.
- ↑ Template:Cite news
2013
- http://observationsandnotes.blogspot.com/2010/11/100-years-of-bond-interest-rate-history.html
- QUOTE: 100-year history of 10-year Treasury Note interest rates (yields) 1900 - 2013
The graph above shows U.S. interest rates beginning in 1900. From 1953 onward, the rates are 10-year U.S. Treasury Note rates, plotted monthly; prior to 1953, they're the less granular. ...