Long-Term U.S. Treasury Bond

Long-term U.S. Treasury bond (treasury bonds) based mutual funds and ETFs invest... Long-term U.S. Treasury bond (treasury bonds) based mutual funds and ETFs invest primarily (more than 90% of their assets) in U.S. government debt with typical maturities ranging between 10 and 30 years. Individual treasury bonds, sold by the U.S. Department of the Treasury to fund different government services and programs running over multiple years, earn a fixed rate of interest every six months until maturity. Interest income is subject to federal income taxes, but exempt from state and local income taxes. Treasury bonds are generally regarded as safe investments, in the sense that investors are confident the government will not default on either its interest or principal obligations. For this reason, compared to other similarly structured debt securities, treasury bonds always have better ratings from credit rating agencies and tend to be part of conservative fixed-income portfolios. Due to their safety net, treasury bonds generally yield less than riskier securities (such as investment-grade corporate debt and high-yield corporate debt), but an investor’s principal amount remains more secure. Investors purchasing treasury bonds should be aware of interest rate risk typically associated with any long-term debt security. Investors in treasury bonds believe that interest rates will fall in the long run, as this will tend to increase the market value of their bond holdings (given the inverse relationship between interest rates and bond prices). However, a rising rate environment can increase the interest rate risk for these securities whose market value can fall. Last Updated: 12/01/2023 View more View less

Long-term U.S. Treasury bond (treasury bonds) based mutual funds and ETFs invest primarily (more than 90% of their assets) in U.S. government debt with typical maturities ranging between 10 and 30 years. Individual... Long-term U.S. Treasury bond (treasury bonds) based mutual funds and ETFs invest primarily (more than 90% of their assets) in U.S. government debt with typical maturities ranging between 10 and 30 years. Individual treasury bonds, sold by the U.S. Department of the Treasury to fund different government services and programs running over multiple years, earn a fixed rate of interest every six months until maturity. Interest income is subject to federal income taxes, but exempt from state and local income taxes. Treasury bonds are generally regarded as safe investments, in the sense that investors are confident the government will not default on either its interest or principal obligations. For this reason, compared to other similarly structured debt securities, treasury bonds always have better ratings from credit rating agencies and tend to be part of conservative fixed-income portfolios. Due to their safety net, treasury bonds generally yield less than riskier securities (such as investment-grade corporate debt and high-yield corporate debt), but an investor’s principal amount remains more secure. Investors purchasing treasury bonds should be aware of interest rate risk typically associated with any long-term debt security. Investors in treasury bonds believe that interest rates will fall in the long run, as this will tend to increase the market value of their bond holdings (given the inverse relationship between interest rates and bond prices). However, a rising rate environment can increase the interest rate risk for these securities whose market value can fall. Last Updated: 12/01/2023 View more View less