What Is the 30-Year Treasury?
Let me explain the 30-year Treasury to you directly: it's a U.S. Treasury debt obligation that matures in 30 years. It used to be the main benchmark for U.S. bonds, but now most people look to the 10-year Treasury as the key indicator.
Key Takeaways
You should know that 30-year Treasuries are bonds issued by the U.S. government with a 30-year maturity. The government also issues other securities like Treasury bills, notes, and Inflation-Protected Securities (TIPS). These 30-year bonds pay interest every six months until maturity, at which point you get the face value back.
Understanding the 30-Year Treasury
The U.S. government borrows money by issuing debt through the Treasury department, and you can buy instruments like Treasury bills (T-bills) for terms under a year, notes for two to 10 years, and TIPS, which adjust principal based on the Consumer Price Index to handle inflation or deflation. For longer terms, you have U.S. Savings bonds or Treasury bonds.
Special Considerations
Treasury bonds come with maturities of 20 or 30 years and pay interest semiannually until maturity, when you receive the face value. They typically offer higher interest than shorter Treasuries to account for the added risks of a longer term, but they're relatively safe because the U.S. government backs them. The price and interest rate get set at auctions, where the bond might sell at par, a premium, or a discount depending on the yield to maturity compared to the interest rate. In one auction, you can buy up to $5 million non-competitively or 35% of the offering competitively, with bonds sold in $100 increments and a minimum of $100.
30-Year Treasury vs. Savings Bonds
Series EE Savings bonds are non-marketable and earn interest over 30 years, but unlike Treasuries, the interest accumulates and you get it all when you redeem the bond. You can redeem after one year, but selling before five years means losing the last three months' interest—for instance, after 24 months, you'd only get 21 months' worth. Since the U.S. is a low-risk borrower, 30-year Treasury rates often signal the broader bond market's health, dropping with high demand and rising with low demand. The S&P U.S. Treasury Bond Current 30-Year Index tracks the latest 30-year bond to measure market performance.
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