 Sam
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 Posted: Fri Apr 09, 2004 2:10 am Post subject: Treasury Bonds: The safest of all investments |
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Treasury bonds are long-term debt securities issued by the US government. These bonds have maturity dates of 10 to 30 years. The US Treasury bonds continue to trade in the secondary market until no new bonds are being issued. The bonds having maturity of 30 years are sold twice a year.
The 10 year Treasury Note is taken to be the benchmark security for the US debts. The price of Treasury bonds increases when interest rates decline and reduces when rates rise. These bonds pay interest in every 6 months until they mature.
You can use Treasury bonds to:
- Diversify your investment portfolio.
- Accumulate funds for education.
- Supplement your income after retirement.
Some facts on Treasury Bond:
- The price and interest on the bond is determined at an auction. The price may be greater than, less or equal to the face value of the bond.
- Bonds are mostly sold at denominations of $1000.
- A Treasury bond can be held till it matures or sold before it matures.
- When a bond matures, the owner gets the face value of the bond.
- The interest on the bond is subject to federal income tax but exempt from state and local income taxes.
- Often when you purchase a bond, you are charged accrued interest. This is the interest earned in the current semiannual period before you could obtain the security. The accrued interest is then paid back to you as a part of the next semiannual interest payment.
Options after the maturity of the bond:
- When the bond matures, you can use the principal of the bond to buy another security, a process called Repeat Purchase.
- You can reinvest the bond but this should be done with Treasury Notes only. The deadline for the reinvestment is 11 days prior to the maturity date. You can reinvest the exact principal amount of the bond, a part of it or an amount greater than that. In order to invest more than the principal amount of the bond, you should reinvest the principal of your maturing security.
- You can also redeem the Treasury bond. In order to do so, you should deposit the principal into your bank account.
Treasury bonds are regarded as the safest of all investments since these are backed by the Federal government. These bonds can be used to generate cash required for various purposes and they also offer various options after maturity. |
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