Treasury Debt Bonds

A Treasury Debt Bond is called a "U.S. debt security" and has a fixed interest rate with a maturity period of over 10 years. [1] In other words, if you invest in a Treasury bond, it is in your best interest to not touch it until it has matured so that you can take advantage of the full return rather than just part of it.

The payments are made in the form of interest on a semi-annual basis. Any income that is received from the bond is taxed federally and not state or locally. [1] Furthermore, the bonds are issued with a denomination no less than $1,000. In order to purchase a Treasury Debt Bond or "T-Bond," it must be purchased at an auction. It is possible to obtain the bond at a price lower than what it would normally be if the bid placed is a competitive bid. If the bid is non-competitive, then the purchase must be accepted at the set rate. It is after the auction win that the bonds are sold in the secondary market. [1]

How to Buy

If you want to buy a T-Bond, it is best to do so from the U.S. Treasury. They offer a program in which you are able to buy without paying a fee or for a low fee. This program is called the TreasuryDirect program. You can also consult with a Financial Advisor on purchasing treasuries.

Perhaps the least complicated method in buying Treasury bonds is to go through a financial advisor. This is because a financial advisor is someone who knows the ins and outs of treasury bonds. They can take care of the technicalities of the purchase and help you ensure that you keep your bond until maturity.

If you are in doubt about buying treasuries, know that they are the safest investment offered in the United States. The risk is virtually zero because they are backed by the full faith and credit of the United States. The United States is guaranteeing you that your investment is not going to be lost and that all payments due will be made to you. If something happens, then it is the burden of the United States treasury to ensure that everything is made right.

It is also important to know that historically, treasuries have had higher returns than U.S. Savings Bonds in the long-term. There are times in which Savings Bonds may pay higher than treasuries in the short term. But when buying a treasury debt bond, the goal is to keep it until maturity.

Selling

Because treasuries are negotiable, you can sell them at any time. The market is ready for you to sell at any time. However, you do want to make sure you do not sell prematurely unless you absolutely have to. What you sell at, however, depends upon the current interest rates. Due to the negotiable nature of treasuries, you can even use them as collateral on home and car loans. It is important to note that you cannot use treasury bonds as collateral if you used the TreasuryDirect program to purchase them. You can if you have used a financial advisor to buy your bond.

So if you want a safe investment that will earn you returns over the long-term, treasury debt bonds are a great investment vehicle for that. Many individuals may consider utilizing the services of a financial advisor to make this investment and to utilize this investment as a way to secure retirement funds in addition to other savings and investment methods that are used for retirement income.

[1] http://www.investopedia.com/terms/t/treasurybond.asp 06/23/10

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