Treasury Bond Definition and Legal Meaning

On this page, you'll find the legal definition and meaning of Treasury Bond, written in plain English, along with examples of how it is used.

What is Treasury Bond?

It is a long term bond issued by the US treasury with a maturity over ten years.

History and Meaning of Treasury Bond

Treasury Bonds, also known as T-bonds, are long-term debt securities issued by the US Department of Treasury, and they mature in more than ten years. They are considered the most stable and low-risk investment options that the government offers investors to raise capital. Treasury Bonds were initially created to finance the nation's war efforts and have been in existence since the United States was founded.

The interest rate on Treasury Bonds is lower than most other bonds because of the low default risk and the security that the government offers against inflation. Investors are attracted to Treasury Bonds because they provide a predictable stream of income over time, making them popular among retirees.

Examples of Treasury Bond

  1. John purchased a $1,000 Treasury Bond at the auction with a maturity of 20 years, which will pay a 2% interest rate per year.
  2. The bank invested its customer's cash reserve in Treasury Bonds to earn a modest return and preserve the principal amount invested.
  3. An investor sold Treasury Bonds before maturity, causing the yield to change, which led to changes in the interest rates.
  4. The Government used Treasury Bonds as a financial instrument to finance the country's economic infrastructure development projects.
  5. An investment firm recommended its clients to buy Treasury Bonds to diversify their portfolio and invest in a low-risk asset class.

Legal Terms Similar to Treasury Bond

  1. Treasury Bills: Short term debt with a maturity of fewer than ten years issued by the US Department of Treasury.
  2. Treasury Inflation-Protected Securities (TIPS): Bonds that protect investors from inflation by raising the interest rate to keep pace with inflation.
  3. Municipal Bonds: Debt securities issued by individual states and local governments to raise capital for public infrastructure projects.