Elevated inflation and rapid economic growth have sent the 10-year Treasury yield closer to 5 percent. As a result, Treasury bonds are offering their highest returns in years. As some investors flock to safe haven investments, T-bonds are something they may want to consider.
Treasury bonds provide regular income, security, and tax benefits, which can make them key components of a diversified portfolio for retirement. Let’s take a closer look at this investment option.
What Are Treasury Bonds?
When you buy a Treasury bond, you’re extending a loan to the U.S. government. In return, Uncle Sam will pay you a fixed rate of interest every six months until the bond matures. When the bond matures in 20 or 30 years, you get back what is known as the bond’s “face value.”
So if you purchase a $10,000, 30-year Treasury bond with a 5 percent yield (interest rate), you will receive $500 each year (or $250 every six months.) And after 30 years, you’d also get your $10,000 back.
But you don’t have to hold the bond until maturity. You can sell it on the secondary market or bond market.
How to Buy Treasury Bonds?
You can purchase Treasury bonds directly through TreasuryDirect.com. Treasury bonds are sold in increments of $100. Many banks and brokerages also offer T-bonds, but you may incur fees if you go this route.
The interest you earn from a Treasury bond is generally exempt from taxation at the state and local level. However, it will be taxed by the federal government.
The Advantages of a Treasury Bond
T-bonds and other Treasury securities are considered among the safest investments in the world. That’s because they are backed by the full faith and credit of the U.S. government. It also provides a predictable and ongoing stream of income for the term of the bond. And with today’s historically high rates, that could equal a healthy series of payments.
This feature could also make them a valuable component of your retirement portfolio. That’s because you’d be receiving regular and essentially guaranteed payments even during a market downturn.
When you’re closest to retirement, many financial experts suggest you aim to preserve your savings and take a less risky approach to investing. That’s why many financial advisers recommend that retirees and near-retirees focus more on fixed-income investments like bonds. However, there are other types of Treasury securities that offer similar benefits.
Types of Treasury Securities
The Treasury offers various securities to fund the government. Depending on your individual investment goals, one type may be more appealing than another.
A Treasury note or T-note, for example, pays interest every six months until maturity. Treasury notes are available in maturities that span two, three, five, seven, and 10 years.
Treasury bills or T-bills work a bit differently. You purchase the bills at a discounted price, and when the bill matures, you get the (higher) face value. These are available in much shorter terms spanning four, eight, 13, 17, 26, and 52 weeks.
The Disadvantages of Investing in T-bonds
While T-bonds can provide a regular stream of income, they come with specific risks. For instance, there’s inflation risk.
You can expect Treasury bonds with yields of around 4.5 percent today, beating the current rate of inflation, which is 2.9 percent. But if inflation goes above 5 percent, it can seriously erode the purchasing power of your annual interest payments.
In addition, bonds carry interest rate risk for bond investors selling these securities on the secondary market.
That’s because the price of T-bonds moves in the opposite direction of interest rates. So if interest rates rise, the value of existing T-bonds on the secondary market decreases. This makes it difficult for investors to sell them without losing out on their investment.
The Bottom Line
If you’re looking for a safe-haven investment that can provide you with a steady and predictable stream of income, then a T-bond may be right for you—especially with the current high yields. Although you don’t have to hold onto your bond until maturity, these are considered long-term investments with a timeframe of 20 to 30 years until they fully mature.
If you’re interested in a medium-term investment that offers similar protections, you can explore other Treasury securities such as the 10-year Treasury note.
The Epoch Times copyright © 2025. The views and opinions expressed are those of the authors. They are meant for general informational purposes only and should not be construed or interpreted as a recommendation or solicitation. The Epoch Times does not provide investment, tax, legal, financial planning, estate planning, or any other personal finance advice. The Epoch Times holds no liability for the accuracy or timeliness of the information provided.
