10 YEAR TREASURY BOND RATE
Treasury bond (T-bond) or government bond, is issued by a national government and is not exposed to default risk. It is characterized as the safest bond, with the lowest interest rate. A treasury bond is backed by the full faith and credit of the relevant government. The treasury Bonds provide the government with external funds to finance long-term investments and also to finance current expenditure
Treasury bond is one of the various types of Treasury securities which include: Treasury Bills, Treasury Notes, and Treasury Bonds.
Just like all other bonds one should be aware of the following terms
Principal-it is the amount on which the issuer pays interest.
Maturity of bond –it is the length of time until the when the issuer has to repay the nominal amount.
Coupon -it is the interest rate that the issuer pays to the holder.
Yield -it is the rate of return received from investing in the bond.
Credit Quality – the probability that the bondholders will receive the amounts promised at the due dates.
Treasury bonds also known as long bonds offer maturities of 10, 20 and 30 years. However the 10-year Treasury bond is the most widely followed of all maturities. It is used as both the benchmark for the Treasury market and the basis for banks’ calculation of mortgage rates. Typically, the yield becomes higher with the more the distant of the maturity date becomes.
In the United States of America, Treasury bonds make interest payments semi-annually and the income that holders receive is only taxed at the federal level.
The Treasury bonds pay a traditional coupon or interest payment, every six months.
Once T-bonds are issued, their prices fluctuate so their yields remain linked to market prices.
In general, the longer the time there is until the bond matures, the greater price fluctuation it will experience.
Treasury bonds are issued with a minimum denomination of $1,000.
The price and interest rate of a bond are determined during an auction. The price may be greater than, less than, or equal to the bond’s paramount.
The bonds are usually sold through auction in which the maximum purchase amount is about $5 million for non-competitive bid or 35% of the offering for competitive bid. A competitive bid states the rate that the bidder is willing to accept; it will be accepted depending on how it compares to the set rate of the bond. A non-competitive bid ensures that the bidder will get the bond but he or she will have to accept the set rate. After the auction, the bonds can be sold in the secondary market.
When these security is auctioned, it may sell at a price that translates to a yield to maturity higher, or lower, than that of the coupon.
After you commit your cash till the maturity, at the maturity date you can redeem the bond or use its proceeds to reinvest into another bond of the same term.