Treasury Bond.
A definition, in plain English — with the books that teach it.
What it means
Treasury bonds are long-term debt securities issued by the U.S. federal government with maturities of 10 to 30 years. They pay a fixed coupon semi-annually and return face value at maturity. Because they are backed by the full faith and credit of the U.S. government, they carry virtually no default risk and serve as the global benchmark for risk-free rates. Treasury bonds are sensitive to interest rate changes due to their long duration, and their yields drive mortgage rates, corporate borrowing costs, and equity valuations.
Example
An investor buys a 30-year Treasury bond with a 4.5% coupon for $10,000. They receive $450/year ($225 every six months) and get $10,000 back in 2055. If rates rise to 5.5% after purchase, the bond's market price falls to roughly $8,500 — a paper loss of $1,500, though the investor still receives all contractual payments if they hold to maturity.
