Treasury Bonds?

Question

How does a treasury bond work? How do you maximize your profit from it? What bonds are the best to have? How long should a person keep them for? Please be as specific as possible. Thanks

Answer 1

Treasury bonds are debt issued by the U.S. government. They are issued in $1000 denominations and mature in anywhere from three months to 30 years.

More specifically, treasury bills mature in three months to a year; treasury notes mature in two to 10 years; and treasury bonds mature in 30 years.

Treasuries are considered the ultimate in safety; the risk of default is practically nonexistent. Many people buy them at issue to secure a return rate (or yield), with the knowledge that they will get thier principal back at maturity.

You can also buy them for the purpose of trading the security (like you would a stock). Personally, this is difficult for most consumers.

Answer 2

Treasury Bonds or "T-Bills" are short term investments. Usually about a 6 month holding period for the investment. You buy them from the US Treasury at a discount and sell them back at full price. Municipal bonds may work for you because they can be exempt from federal income taxes. You hold or keep bonds until they mature. Some bonds are long term, like 10 year bonds and some are short term like Treasury's. The idea is you buy the bond, then you get income from the entity that you purchased the bond from. When the bond matures, you get your money back.

Answer 3

Stay away from T-bills. They do not beat inflation plus taxes (basically you are paying the government to take your money). If you buy T-bills, you will lose worth. Instead, buy TIPS and I-bonds which at least protect you from inflation. T-bills are a good way to protect millions or billions of dollars (T-bills are insured by the Federal government. Banks only guarentee up to something like $100,000), which is often labled as cash. So if you see a company has $50 billion in cash, they really have $50 billion in t-bills. I think Tips and I-bonds are only good up to 30 years and then they stop earning interest. They might get "called" when the goverenment "cashes" out your bond early.