Treasury Bonds: Rates & Terms
Treasury bonds are issued in a term of 30 years and are offered in multiples of $100.
Price and Interest
The price and interest rate of a bond are determined at auction. The price may be greater than, less than, or equal to the bond's par amount (or face value). (See prices and interest rates in recent auctions.)
The price of a fixed rate security depends on its yield to maturity and the interest rate. If the yield to maturity (YTM) is greater than the interest rate, the price will be less than par value; if the YTM is equal to the interest rate, the price will be equal to par; if the YTM is less than the interest rate, the price will be greater than par.
Here are some hypothetical examples of these conditions:
|Condition||Type of Security||Yield at Auction||Interest Coupon Rate||Price||Explanation|
|Discount (price below par)||30-year bond
Issue Date: 8/15/2005
|4.35%||4.25%||98.333317||Below par price required to equate to 4.35% yield|
|Premium (price above par)||30-year bond reopening
Issue Date: 9/15/2005
|3.99%||4.25%||104.511963||Above par price required to equate to 3.99% yield|
Sometimes when you buy a bond, you are charged accrued interest, which is the interest the security earned in the current semiannual interest period before you took possession of the security. If you are charged accrued interest, we pay it back to you as part of your next semiannual interest payment.
For example, you buy a 30-Year Treasury bond issued February 15, 2006 and maturing February 15, 2036. If February 15, 2006 fell on a Saturday, Treasury would issue the bond on the next business day, Monday February 17, 2006. Besides the purchase price, you would pay Treasury for the interest accrued from February 15 to February 17, 2006. When you get the first semiannual interest payment, it will include the accrued interest you paid.
If you are a TreasuryDirect customer, you should look at your Current Holdings, Pending Transactions Detail after 5 pm Eastern Time on auction day and check the price per $100 and accrued interest to determine the total price of the security. Next, make sure the source of funds you selected has sufficient funds to cover the total price. If you need to add funds to cover the purchase price, you have to do so before the issue date of the security.
If you buy from a bank or broker, please consult the bank or broker to learn payment arrangements.
Bonds pay interest every six months.
Options at Maturity – and Before
You can hold a bond until it matures or sell it before it matures.
If you don't sell, your options at maturity depend on where you hold your bond:
- TreasuryDirect. Redeem the bond or use its proceeds to reinvest into another bond of the same term.
- Legacy Treasury Direct. Redeem the bond. (Bonds cannot be reinvested in Legacy Treasury Direct, which is being phased out.)
- Bank or Broker. For your options, consult your bank or broker.
- Original Issues—February, May, August, November
- *Reopenings—January, March, April, June, July, September, October, December
* In a reopening, we sell an additional amount of a previously issued security. The reopened security has the same maturity date and interest rate as the original security. However, as compared to the original security, the reopened security has a different issue date and usually a different purchase price.
Paper Bonds or Electronic Bonds
Treasury bonds exist in either of two formats: as paper certificates or as electronic entries in accounts. Paper Treasury bonds can be converted to electronic form. For information on this and other issues about paper Treasury bonds, contact us by any of these methods:
- Send an e-mail
- Call 304-480-7711
- Write to:
Bureau of the Public Debt
P.O. Box 426
Parkersburg, WV 26106-0426