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.
