Treasury bonds — also known as T-bonds — are issued directly by the U.S. government. These bonds offer long-term stability with maturities of up to 30 years. While they typically yield lower returns compared to stocks or corporate bonds, their low risk makes them an attractive choice for conservative investors or those nearing retirement.

If you’re considering adding Treasury bonds to your portfolio, a financial advisor can help you determine how they fit into your overall strategy.

Treasury Bonds: The Basics

Like other types of bonds, Treasury bonds involve lending your money in exchange for interest payments. When you purchase a T-bond, you’re effectively lending money to the U.S. government. In return, you’ll receive fixed interest payments every six months until the bond reaches maturity.

T-bonds are available in denominations starting at $100 and can be purchased through a broker, bank or directly from the U.S. Treasury. These bonds mature in 30 years, at which point you receive your full principal back. Many investors use T-bonds as a long-term savings tool — whether to supplement retirement income or fund major life expenses, such as a child’s college education.

What makes federal Treasury bonds so safe? Their reliability comes from the creditworthiness of the U.S. government, which has a strong standing in the global economy. This backing virtually guarantees that you’ll receive both your interest payments and your initial investment at face value. The same assurance applies to other government-issued securities like Treasury bills, Treasury notes and Treasury Inflation-Protected Securities (TIPS), all of which help manage national debt.

Another benefit: T-bonds are exempt from state and local income taxes. You’ll only pay federal taxes on the interest you earn. However, keep in mind that safety comes with trade-offs. Because T-bonds carry lower risk, their returns are generally lower compared to more volatile investments like stocks.

Related Article: What is a Mutual Fund?

Treasury Bonds – Auctions, Rates and How to Buy

If you’re not buying your bond through a broker or bank, you can purchase one directly from the U.S. Treasury during an electronic auction. New 30-year Treasury bonds are available at auctions held in February, May, August and November.

Step 1: Set Up Your TreasuryDirect Account

To get started, you would go to TreasuryDirect.gov and create an account. This is where you can view upcoming auction dates and manage your bond purchases.

Step 2: Choose Between Competitive and Non-Competitive Bidding

Once you’re ready to participate in an auction, you’ll need to decide how you want to bid:

Non-Competitive Bidding (Recommended for Most Individuals)

You agree to accept whatever interest rate (yield) is set at the end of the auction.
You’re guaranteed to receive the full amount of the bond you request.
You can purchase up to $5 million in a single auction.
This option is simple and ensures participation—ideal if you’re not trying to guess interest rates.

Competitive Bidding (For Experienced Investors)

You specify the yield (interest rate) you’re willing to accept.
You may receive all, some, or none of the bonds you request.
Bids are awarded from lowest yield to highest, meaning lower-yield bidders win first.
You’re limited to 35% of the total offering amount.

Bond Pricing: What You Might Pay

When a bond is sold at auction, the price you pay depends on market interest rates. It can be:

At a Discount: Below face value
At a Premium: Above face value
At Par: Equal to face value

Your bond will also come with a coupon rate, which is the annual percentage of the face value you’ll receive in interest, paid every six months.

Yield to Maturity (YTM): What You’ll Actually Earn

In addition to the coupon rate, you’ll want to understand yield to maturity (YTM). This is the total annual return you’ll earn if you hold the bond until maturity. It accounts for the bond’s price, interest payments, time to maturity and face value. Let’s take a look at an example:

Face value: $1,000
Coupon rate: 3%
Annual interest: $30 ($15 every six months)
Auction price: $900

In this case, your YTM would be about 3.54%, since you paid less than face value but still receive full interest and principal.

What About Zero-Coupon Bonds?

Zero-coupon Treasury bonds are another option. These bonds don’t pay periodic interest. Instead, you buy them at a deep discount and receive the full face value at maturity. This can be ideal if you’d rather pay less upfront and wait for one lump-sum payout later.

After the Purchase

Once you’ve bought your bond, the U.S. Treasury withdraws the funds directly from your linked bank account. From there:

You’ll receive semiannual interest payments until the bond matures.
At the 30-year maturity mark, you’ll get back the full face value.
If you don’t want to hold it that long, you can sell the bond early through a bank, broker or on the secondary market.

Buying Treasury bonds through an auction is a reliable way to invest directly with the government — and a useful option for those looking to preserve capital over the long term. If you’re not sure whether competitive bidding, non-competitive bidding or zero-coupon bonds make the most sense for you, consider speaking with a financial advisor. They can help you weigh your options and build a balanced portfolio based on your goals and risk tolerance.

Related Article: All About Municipal Bonds

10-Year Treasury Bonds

Although Treasury bonds tend to come with 30-year terms, you can choose bonds that mature in a shorter time frame. For example, if you decided to go for a 10-year T-bond, you’d still be getting paid interest twice a year. Your bond would mature a little bit faster, and after a decade you’d collect the face value of the bond.

Besides buying a treasury bond with a shorter term, you could also invest in a Treasury bond exchange-traded fund (ETF) that’s traded like a stock. This way, you could potentially earn more money at a faster rate than you would with a standard T-bond. Also, you’d be more aware of the price your bond is going for because you could use the index to monitor how your bond is performing.

One problem you might have with a Treasury bond ETF, though, is the fact that there is an extra fee you’ll likely have to pay for keeping it going from month to month.

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Bottom Line

When it comes to long-term investments like Treasury bonds, you’ve got several options that will allow you to slowly pump money into your accounts over time. Ultimately, you’ll have to pick the strategy that will work best for your financial future and your risk tolerance. Remember to factor in the effects of inflation when you consider the long-term gains from a treasury bond, and don’t forget to find the balance of stocks and bonds that’s right for you.

Tips for Income Investing

When thinking about what investments you could make to better meet your financial goals, consider working with a financial advisor. They can help you create a financial plan and even manage your money for you. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Understanding diversification is a great first step for anyone looking to step up their investment game. Diversifying is the process of spreading your investments out across the market. It helps ensure that the health of your portfolio doesn’t require the success of a specific investment type.