How Treasury bonds work
The Treasury sells bonds with terms of 20 or 30 years. The interest rate is set at the auction, never changes over the life of the bond, and is never below 0.125%. Interest arrives every six months and the face value comes back at maturity. Bonds are electronic only, sold from a $100 minimum in $100 steps.
The coupon rate and the auction’s winning yield rarely match exactly, so a new bond rarely sells at exactly par: a yield above the coupon rate means a price below par, and a yield below it means a price above par. When Treasury reopens an existing bond, the new amount has the same coupon and maturity date but a different price, and buyers may pay accrued interest, which is returned with the first interest payment.
Default risk is about as low as it gets, since the bonds carry the full faith and credit of the U.S. government. The bonds sold today cannot be called early, and they can be split into STRIPS, zero-coupon pieces that banks and brokers trade and hold.
Treasury bonds vs. bills, notes, TIPS and savings bonds
People often say Treasury bonds when they mean any Treasury security, but strictly the name belongs to the 20- and 30-year issues. Bills and notes are the same kind of debt security with shorter terms, so their prices move far less when rates change. TIPS adjust their principal for inflation. Savings bonds, including I bonds, are a separate product: they cannot be sold to another investor, only redeemed with the Treasury, and TreasuryDirect stresses that they are not the same as Treasury bonds.
All of them pay interest that is taxed federally but not by states. What separates them is how long your money is committed and how far the price can swing meanwhile. Longer terms usually pay more to compensate for that swing, though not always: on September 18, 2026 the 20-year yielded slightly more than the 30-year.
How to buy and sell Treasury bonds
New bonds come to market at auction. Treasury auctions new 20- and 30-year bonds in February, May, August and November and reopens them in the other eight months, so each term is on sale every month. A noncompetitive bid, placed in TreasuryDirect or through a bank or broker, guarantees you the bond at whatever yield the auction sets, from $100 up to $10 million. Competitive bids, which name a yield and may be filled only in part, must go through a bank, broker or dealer.
TreasuryDirect has two catches. A new purchase must be held 45 calendar days before it can be transferred or sold, and TreasuryDirect does not sell for you: to sell before maturity, you transfer the bond to a bank or broker and sell there. A brokerage account also lets you buy existing bonds at any time, at a price that reflects today’s yields plus a dealer markup.
The third route is a Treasury mutual fund or ETF: easier to trade, but with no maturity date that returns face value. For money needed on set dates, individual Treasuries can form the rungs of a bond ladder.
Treasury bond yields and taxes in 2026
Long Treasury yields rose through 2026. On the Treasury’s daily par yield curve, the 30-year yield went from 4.86% on January 2 to 5.34% on September 18, and the 20-year from 4.81% to 5.38%. The auctions tell the same story: the new 30-year bond sold in February carries a 4-3/4% coupon, and August’s carries 5-1/8%, sold at a yield of 5.216%.
Interest is taxed by the federal government in the year you receive it, reported on Form 1099-INT, and is exempt from all state and local income taxes. The exemption is worth most in high-tax states and does nothing inside an IRA or 401(k). The interest does count toward the 3.8% net investment income tax for higher earners.
Discounts need care. A small discount at auction, under ¼ of 1% of face value times the full years to maturity, is treated as zero and becomes a capital gain at maturity. Buying an older bond below par in the market creates market discount, which is generally taxed as interest income.
Common mistakes with Treasury bonds
Treasury bonds remove nearly all default risk, which makes it easy to forget the risks they keep. A new 30-year bond has a duration of about 15 years, so its price reacts to interest rates far more than a bill or short note does, and three decades of Inflation can shrink what its fixed coupons buy. Most mistakes come from treating long bonds like the short, stable end of fixed income, such as a savings account or a CD.
- Buying 20- or 30-year bonds with money you may need in a few years, then having to sell after rates have risen.
- Comparing a Treasury’s yield with a CD’s without adjusting for the state income tax the Treasury avoids.
- Holding them in an IRA while keeping fully taxable bonds in a taxable account, which wastes the state exemption; see asset location.
- Assuming a long Treasury fund cannot lose money because the bonds inside it are government-backed.
Illustrative numbers
Buying $10,000 of the August 2026 30-year Treasury bond
- D
- Modified duration in years, about 15 for a new 30-year bond yielding 5.2%
- Δy
- Change in market yield, in percentage points
An estimate for small moves: for large moves, actual losses are a little smaller and actual gains a little larger than the formula gives.
Auction on Aug. 13, 20265-1/8% coupon; yield 5.216%; price 98.627017 per $100
Cost of $10,000 face value$9,862.70, plus $2.79 of accrued interest
Interest$512.50 a year, as $256.25 each Feb. 15 and Aug. 15
At maturity, Aug. 15, 2056$10,000; the $137.30 discount is de minimis, taxed as a capital gain
Same bond reopened Sept. 10, 2026Yield 5.308%; price 97.262274, or $9,726.23
Change in market value in four weeks−$136.47 (−1.4%) for a 0.092-point rise in yield
The price fell about 15 times the rise in yield (1.38% ÷ 0.092 ≈ 15), matching a duration of roughly 15 years. Priced out in full, a 1-point jump in long rates would cut this bond’s value by about 14% on paper and a 1-point fall would lift it about 17%, while its $512.50 of yearly interest and $10,000 at maturity would not change.
At a glance
The Treasury family at a glance (all interest is federally taxable and state-exempt)
| Security | Terms | How it pays | Can you sell it? |
|---|---|---|---|
| Treasury bills | 4, 6, 8, 13, 17, 26 and 52 weeks | Sold at a discount; face value paid at maturity | Yes |
| Treasury notes | 2, 3, 5, 7 and 10 years | Fixed rate, every six months | Yes |
| Treasury bonds | 20 and 30 years | Fixed rate, every six months | Yes |
| TIPS | 5, 10 and 30 years | Fixed rate on CPI-adjusted principal, every six months | Yes |
| Floating rate notes | 2 years | Quarterly, indexed to the 13-week bill rate | Yes |
| I bonds | Earn interest for up to 30 years | 4.26% composite rate for May–Oct 2026 issues, added to the bond | No; redeem with the Treasury |
Put it in your plan
Treasury Bonds in MoneyWhatIf
In MoneyWhatIf, part or all of an investment account’s bond share can use the Treasury bond type; in a taxable account, the model taxes that interest federally but not at the state level. Choosing Treasury does not change the return on its own, because every bond type uses the plan’s bond return assumption, so enter a return that fits long Treasuries if you hold them. Dated bond-allocation periods can change the bond share over time, and in historical scenarios the bond portion follows bond history.
Common questions
Treasury Bonds FAQs
What is the difference between Treasury bonds and savings bonds?
Treasury bonds are marketable: they are sold at auction, pay interest every six months, and can be sold to other investors before maturity at whatever price the market sets. Savings bonds such as I bonds and EE bonds cannot be sold, only cashed in with the Treasury. Their value never falls, but purchases are capped at $10,000 a year for each type, and you cannot cash them in during the first 12 months.
Can you lose money on Treasury bonds?
Yes, if you sell before maturity after rates have risen. The U.S. government guarantee covers the interest and the face value at maturity, not the market price, and a 30-year bond can lose a large share of its value when long rates climb. Hold to maturity and you receive every coupon and the full face value. The risk that remains is inflation: over 20 or 30 years it can sharply reduce what those fixed payments buy.
What happens when a Treasury bond matures?
On the maturity date the Treasury repays the face value along with the last six-month interest payment, and the bond stops earning interest. If you hold it in TreasuryDirect, you can instead schedule a reinvestment into the same type of security. A reinvestment paid for only with the maturing money skips the 45-day hold that applies to new purchases.
What is the 30-year Treasury yield today?
It changes every trading day, and Treasury publishes it each business day on its daily par yield curve. On September 18, 2026, the curve put the 30-year at 5.34%, the 20-year at 5.38% and the 10-year at 5.01%. That yield is not the same as a bond’s coupon: the newest 30-year bond, first auctioned on August 13, 2026, pays 5-1/8% on face value, and your own yield depends on the price you pay.