What is 30-year Treasury

This is simply the yield paid on a US Treasury Security that has 30 years of maturity. This Treasury used to be the benchmark of the US bond, but the 10-year Treasury is fast gaining more ground.

The Break Down Of 30-year Treasury Security

Treasury securities have been the major tool the United States government used in borrowing money from investors. To do this, the Treasury Department issued debt securities to investors. The debt instruments can include Treasury Inflation-Protected Securities(TIPS), notes and Treasury Bills.

The maturity for T-bill is less than one year while Treasury Notes has a maturity of up to 10 years. The principal of TIPS can be altered by changes in the Consumer Price Index (CPI).  These changes are determined by inflation and deflation. During the period of inflation, principal increase, with inflation, the principal decreases.

The two examples of Treasury Securities with longer maturity terms are Treasury Bonds and Savings Bonds.

Treasury Bonds

These are marketable securities with longer maturity terms, usually 30 years from the day it was issued. Payment of interest on this type of securities is either semi-annual or every six months. Once the security is mature, the investors would be required to pay the face value. Interest on securities with longer maturity is usually higher than securities with shorter maturities. The amount that would be paid for the security and the interest is determined at the auction of the security.

The price of the discount is either par, premium or given at a discount to par. If the interest rate is lower than the yield to maturity (YTM), the bond would be issued at a discount. If the YTM is the same with the interest, the bond would be sold at par. However, if the YTM is lower than the interest rate, the bond would be sold at a premium to par.

In a single auction of non-competitive bidding, a bidder can purchase about $5 million in bonds, while in competitive bidding, a bidder can buy up to 35% of the initial offering amount. Added to this, the minimum bidding purchase is $100.

Savings Bonds

US Saving Bonds especially Series EE Saving Bonds are not marketable. They only accumulate interest for 30 years. Unlike the Treasury Bond, in this type of bond, the interest accumulates until maturity is completed and the paid when security is to be redeemed. Usually, the bond is often redeemed after one year. However, if the bond is sold after a year of purchase, the investor forfeits three months of interest value. This implies that any saving bond sold after one year does not receive full interest value.